Risk Aversion and Preference for Store Price Format

Koichi Yonezawa*, Timothy J. Richards

*Corresponding author for this work

Research output: Contribution to journalArticle (Academic Journal)peer-review

2 Citations (Scopus)

Abstract

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.
Original languageEnglish
Pages (from-to)425-443
Number of pages19
JournalJournal of Agricultural and Resource Economics
Volume41
Issue number3
DOIs
Publication statusPublished - Sept 2016

Keywords

  • Choice-based conjoint
  • Experimental economics
  • Store choice
  • Uncertainty

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