\"Coherent Arbitrariness\": Stable Demand Curves Without Stable Preferences
Ariely, Loewenstein and Prelec's paper proposed coherent arbitrariness: that the absolute level of what people will pay is arbitrary and easily influenced, while the relative ordering of their valuations is orderly, so demand curves can look stable without stable underlying preferences. The demonstration is the famous one. Participants wrote down the last two digits of their social security number, considered whether they would pay that many dollars for wine, chocolates or equipment, and then bid for real, and those with higher digits bid substantially more. It is the study that carried anchoring into business writing. It is also disputed: later re-examinations found very weak effects on market goods and none on lotteries, and this vault cites those alongside it rather than treating either side as settled.
Ariely, Loewenstein and Prelec's paper proposed coherent arbitrariness: that the absolute level of what people will pay is arbitrary and easily influenced, while the relative ordering of their valuations is orderly, so demand curves can look stable without stable underlying preferences. The demonstration is the famous one. Participants wrote down the last two digits of their social security number, considered whether they would pay that many dollars for wine, chocolates or equipment, and then bid for real, and those with higher digits bid substantially more. It is the study that carried anchoring into business writing. It is also disputed: later re-examinations found very weak effects on market goods and none on lotteries, and this vault cites those alongside it rather than treating either side as settled.
Written from the public record for the paper.
What our sources record
Reproduced as it was written when this source was checked, figures and all.
Ariely, D., Loewenstein, G., & Prelec, D. (2003). 'Coherent arbitrariness: Stable demand curves without stable preferences.' Quarterly Journal of Economics, 118(1), 73-105. The social security number demonstration, described here as the disputed one.
Where we use it
- Why the First Price You See Decides What You Pay, Why We Act
Reliability of this reference
The link below was matched against the publisher's record on title, first author and year, and all three agree.
The source
https://doi.org/10.1162/00335530360535153
DOI: 10.1162/00335530360535153