The impact of price frames on consumer decision making

Sector: Abuse of dominance | Behavioural and experimental economics | Behavioural Economics | Business and industry | Competition | Competition Economics | Competition, Regulation and Business | Consumer and firm behaviour | Consumer behaviour | Consumer behaviour and protection | International institutions | NGOs and consumer advocacy | Public Policy | Regulators and government
Client: N/A
Published: May, 2010
Document type: Report 
Tagged: experiments quantitative analysis UK

London Economics was comissioned by the Office of Fair Trading to undertake a behavioural economics study into how different price frames may impact upon consumer behaviour. The study uses experimental economics to test if consumers incur behavioural biases under five common pricing practices used by firms, including drip pricing and “3 for 2” offers. The observations from the experiment show that consumers do indeed suffer from behavioural biases including loss aversion and endowment effects.