Price beliefs and experience: Do consumers’ beliefs converge to empirical distributions with repeated purchases?

Brett Matsumoto () and Forrest Spence

Journal of Economic Behavior & Organization, 2016, vol. 126, issue PA, 243-254

Abstract: We use data on consumers’ subjective beliefs about the distribution of prices in an online marketplace to investigate two questions of interest. First, when consumers face price uncertainty, to what extent do their beliefs about the distribution of prices reflect the actual empirical price distribution? Second, do consumers learn about features of the empirical distribution through experience? Using reported expectations for online textbook prices from a survey of 1224 college students, we find that consumers with no prior experience in purchasing textbooks online tend to expect online prices to be higher than what is observed empirically. However, consumers with more experience in the marketplace generally have more accurate beliefs about the price distribution, which is consistent with learning.

Keywords: Consumer learning; Search; Subjective beliefs; Rational expectations (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S016726811630021X
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:126:y:2016:i:pa:p:243-254

DOI: 10.1016/j.jebo.2016.03.008

Access Statistics for this article

Journal of Economic Behavior & Organization is currently edited by Houser, D. and Puzzello, D.

More articles in Journal of Economic Behavior & Organization from Elsevier
Bibliographic data for series maintained by Catherine Liu ().