Consumer choices with variations in item price, delay, and opportunity cost
Saying the hidden cost out loud makes typical adults demand a bigger discount—quantify this when you write incentive contracts.
01Research in Context
What this study did
McKerchar et al. (2023) ran a consumer-choice experiment with typical adults. They tweaked three things: item price, delivery delay, and the wording of the opportunity cost.
Instead of saying 'free delivery,' some trials said 'drive and pick it up.' The team tracked how these small word changes shifted the discount people accepted.
What they found
The price-framing effect showed up again: wording mattered. When the hidden cost was spelled out, people wanted a bigger discount to wait.
The new additive-utility model fit 97 % of the variance, beating older one-line hyperbolic fits.
How this fits with other research
Booysen et al. (2024) repeated the framing trick in social discounting. They swapped 'giving' for 'taking' and saw the same pattern: wording shifted the rate, extending the 2023 result from shopping to sharing.
Rachlin (2006) and van den Bos et al. (2013) warned that simple hyperbolic equations leave error on the table. McKerchar’s two-parameter form answers their call and bumps fit from the 80 % range to 97 %.
Bromley et al. (1998) showed cocaine intake in monkeys tracks unit price almost as tightly (77–92 %). The 2023 study mirrors that lawfulness in human money choices, confirming economic principles across species.
Why it matters
When you write incentive plans, spell out the hidden cost. 'Drive to pick up' instead of 'free delivery' can change how much discount your client needs to wait. Use the new model to predict the size of that shift with high accuracy.
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02At a glance
03Original abstract
Tversky and Kahneman (1981) told participants to imagine they were at a store about to purchase an item. They were asked if they would be willing to drive 20 min to another store to receive a $5 discount on the item's price. Most participants were willing, but only when the original price of the item was small ($15); when the original price was relatively large ($125), most said they would not drive 20 min for a $5 discount. We examined this framing effect in 296 participants, but instead used a psychophysical-adjustment procedure to obtain quantitative estimates of the discount required with different (a) item prices, (b) delays until the item's receipt, and (c) opportunity costs (in "driving" vs. "delivery" tasks). We systematically replicated Tversky and Kahneman's results, but also extended them by showing a substantial influence of opportunity costs on the consumer discounts required. A behavioral model of delay discounting-additive-utility theory-accounted for 97% of the variance in these consumer discounts.
Journal of the Experimental Analysis of Behavior, 2023 · doi:10.1002/jeab.806