Do markets reveal preferences or shape them?

Isoni, Andrea, Brooks, Peter, Loomes, Graham and Sugden, Robert (2016) Do markets reveal preferences or shape them? Journal of Economic Behavior & Organization, 122. pp. 1-16. ISSN 0167-2681

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    Abstract

    We contrast the proposition that markets reveal independently-existing preferences with the alternative possibility that they may help to shape them. Using demand-revealing experimental market institutions, we separate the shaping effects of price cues from the effects of market discipline. We find that individual valuations and prevailing prices are systematically affected by both exogenous manipulations of price expectations and endogenous but divergent price feedback. These effects persist to varying degrees, in spite of further market experience. In some circumstances, market experience may actually consolidate them. We discuss possible explanations for these effects of uninformative price cues on revealed preferences.

    Item Type: Article
    Additional Information: This is an open access article published under a CC BY 4.0 licence: http://creativecommons.org/licenses/by/4.0/
    Uncontrolled Keywords: shaping effects,market discipline,repeated markets,price sensitivity,preference imprecision
    Faculty \ School: Faculty of Social Sciences > School of Economics
    Depositing User: Pure Connector
    Date Deposited: 15 Jan 2016 10:00
    Last Modified: 13 Mar 2019 10:41
    URI: https://ueaeprints.uea.ac.uk/id/eprint/56329
    DOI: 10.1016/j.jebo.2015.11.006

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