MAZUREK, Jiří, Cristina PEREZ RICO and Carlos FERNANDEZ GARCIA. The Law of Demand and the Loss of Confidence Effect: An Experimental Study. Heliyon. 2019, vol. 5, No 11, p. 1-6. ISSN 2405-8440. Available from: https://dx.doi.org/10.1016/j.heliyon.2019.e02685.
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Basic information
Original name The Law of Demand and the Loss of Confidence Effect: An Experimental Study
Authors MAZUREK, Jiří (203 Czech Republic, guarantor, belonging to the institution), Cristina PEREZ RICO (724 Spain) and Carlos FERNANDEZ GARCIA (724 Spain).
Edition Heliyon, 2019, 2405-8440.
Other information
Original language English
Type of outcome Article in a journal
Field of Study 50201 Economic Theory
Country of publisher Netherlands
Confidentiality degree is not subject to a state or trade secret
WWW URL
RIV identification code RIV/47813059:19520/19:A0000057
Organization unit School of Business Administration in Karvina
Doi http://dx.doi.org/10.1016/j.heliyon.2019.e02685
Keywords in English demand function; price elasticity of demand; irrationality; loss of confidence and experimental study
Changed by Changed by: Ing. Petra Skoumalová, učo 50554. Changed: 21/4/2020 11:21.
Abstract
The aim of this article is to examine the possibility that a market demand function (curve) might not be monotonically decreasing in its entire domain according to the consumer theory neoclassical as assumed by the law of demand (for normal goods). This may happen due to limited rationality of (some) consumers and the anchor price effect. When a price of a good decreases to some point, the amount demanded might stops increasing due to the loss of confidence effect: consumers’ unwillingness to buy a too cheap product. The existence of this effect was examined via questionnaire on a sample of 377 undergraduate university students from the Czech Republic, Ecuador and Spain. The main result of this experimental study is that the loss of confidence effect appeared at all three locations, which indicates that the law of demand may not be valid in its entire domain. Furthermore, the results of this study imply that a significant percentage of people make decisions of limited rationality even when facing a very simple task. In addition, statistically significant difference in rational behavior with respect to gender was found.
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