Risk Aversion and Preference for Store Price Format

When choosing among retail store formats, consumers face two alternatives: everyday-low-price (EDLP) stores that offer lower mean prices, with less variation over time, or promotion-based (HILO) stores that offer higher mean prices but more variation over time. In this study, we investigate a relationship between consumers’ risk preferences and their store-choice decisions. We use data from a two-stage, incentive-compatible experiment to measure subjects’ risk preferences and to examine how their attitudes toward risk influence their preferences for store price format.We find that retailers’ pricing strategies allow consumers with different risk attitudes to choose a particular store price format.


Issue Date:
2016
Publication Type:
Journal Article
PURL Identifier:
http://purl.umn.edu/246173
Published in:
Journal of Agricultural and Resource Economics, Volume 41, Number 3
Total Pages:
23




 Record created 2017-04-01, last modified 2017-04-28

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