Contextual reference price in choice experiments

Abstract A reference price depends on the context of purchase. For prices in preference elicitation experiments to be interpreted by respondents exactly as prices in real purchases, a condition must be met: Contextual reference prices in experiments and real purchases must equal. Using a choice experiment, we found that the willingness to pay estimates tend to be smaller when the respondents are reminded about their self‐reported reference price of the product. This shows that the equality of reference price between experiments and real purchases may not hold. Thus, willingness to pay estimated from a choice experiment may only be contextually specific to its setting. The theory of contextual reference price may offer a fresh perspective on hypothetical bias, and it may be useful in refining choice experiments.