POSTPONED: Price norms and consumer behaviour
Seminar cancelled to be rescheduled in 2022.
We examine how consumers’ decisions are shaped by their past experiences as well as by contextual cues. Using data from a large UK retailer, including an experiment that exogenously varied prices, we find that the history of prices faced by individual consumers matters for choice: the consumer is more likely to buy at a given price the higher the prices seen previously. Building on a model where past prices retrieved from memory form a norm relative to which current prices are assessed, we develop new predictions: contextual cues, such as similar goods being on sale, affect memory retrieval, price norms and choice. Demand is inelastic for moderate departures from the (individual-specific) experienced prices but is highly elastic for large price movements. These predictions are confirmed in the data, and help explain puzzling patterns of aggregate demand.
Date: 26 November 2021, 15:15
Venue: Manor Road Building, Manor Road OX1 3UQ
Venue Details: Seminar Room A or Join online https://zoom.us/j/91802954429?pwd=ZzNyeEcvL3JjN2NPVWZHVG9hcmR1UT09
Speaker: Pedro Bordalo (Saïd Business School, University of Oxford)
Organising department: Department of Economics
Part of: Nuffield Economic Theory Seminar
Booking required?: Not required
Audience: Members of the University only
Editor: Emma Heritage