A Monetary Measure of the Strength and Robustness of the Attraction Effect
Economics Letters
We design and implement a task to measure the attraction effect at the individual level, using psychometrics concepts. We will then move on to use this measure in subsequent work. It allows you to measure both the extent to which a subject favors dominant options and the cost that the subject pays for that.
Abstract
The Attraction Effect has been studied in conditions of indifference among options and measured at the aggregate level. We introduce a new within-subjects design based on induced preferences and psychometrics. Our method yields two individual-level measures: the traditional, frequency measure and a new, monetary indicator. The monetary indicator measures the robustness of the effect to decreases in the relative utility of the target with respect to the competitor. We find choice frequencies consistent with the literature. Our monetary measure shows that subjects still prefer the target up to the point where it is 8% more expensive than the competitor.