Public and Private Values
Working Paper 10-5
by Dan Ariely, Anat Bracha, and Jean-Paul L’Huillier
2010 Series
This paper experimentally examines whether looking at other people’s pricing decisions is a type of heuristic—a decisionmaking rule—that people use even when it is not applicable, as in the case of clearly private value goods. We find evidence that this is indeed the case—an individual’s valuation of a purely subjective experience under full information, elicited using an incentive compatible mechanism, is highly influence by valuations made by others. This result can shed light on price behavior, price rigidities, and rents.
JEL Classifications: J64, E24, J11
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