Data resulting from an economic experiment testing the hypothesis that, if consumers do not have well defined preferences and as a result their valuation of a new product is shaped by past experiences of prices, it may be more profitable for firms to follow a strategy of pricing high and then lower. We ran an individual choice experiment with a posted offer market setup, where different dynamic pricing strategies were implemented. We find evidence of preference shaping and the profitability of a ‘high low’ pricing strategy under a wide range of assumptions. The experiment consisted of repeated opportunities to purchase goods in an individual task with a posted offer market frame with only one product involved - referred to as the individual posted offer market. The ESRC Centre for Competition Policy (CCP) at the University of East Anglia (UEA) undertakes interdisciplinary research into competition policy and regulation that has real-world policy relevance without compromising academic rigour. It prides itself on the interdisciplinary nature of the research and the members are drawn from a range of disciplines, including economics, law, business and political science. The Centre was established in September 2004, building on the pre-existing Centre for Competition and Regulation (CCR), with a grant from the ESRC (Economic and Social Research Council). It currently boasts a total of 26 faculty members (including the Director and a Political Science Mentor), 4 full- and part-time researchers and 23 PhD students.

Economic choice experiment with students recruited at the university. Before beginning the task, subjects completed a questionnaire to check their understanding and had an opportunity to ask questions of clarification. After the experimenters answered any question of clarification and subjects did two practice periods with an example product, the individual posted offer market tasks started. It involved two phases, phase 1 and phase 2, of 10 independent trading periods each. The products were either a lottery used in Sonsino et al. (2002) or one of the two lotteries used in Sitzia and Zizzo (2011), scaled up to have the same expected value as that in Sonsino et al. This procedure is based on mixing the lotteries with themselves. During each trading period, subjects were endowed with 650 experimental points. In each trading period subjects saw the price chosen by the computer and decided whether and how much they wanted to buy. Once they had chosen they were brought to another screen with the next task. There were 20 of such tasks. The product did not change throughout the experiment.. Subjects could see all the details of the lottery on sale and spend as much time as they wanted to inspect it. Subjects thus had complete information about the lottery and could in principle make rational and informed choices. In each period a price was chosen randomly from a uniform price distribution within a range. In all experimental treatments, the second 10 periods (phase 2) were run with prices drawn from the Medium distribution; the treatments differed, however, in the price distributions used in the first 10 periods (phase 1). Subjects knew that the price was computerized though they did not know that it was chosen from given uniform distributions.