“coherent Arbitrariness”: Stable Demand Curves without Stable Preferences*

In six experiments we show that initial valuations of familiar products and simple hedonic experiences are strongly inuenced by arbitrary “anchors” (sometimes derived from a person’s social security number). Because subsequent valuations are also coherent with respect to salient differences in perceived quality or quantity of these products and experiences, the entire pattern of valuations can easily create an illusion of order, as if it is being generated by stable underlying preferences. The experiments show that this combination of coherent arbitrariness (1) cannot be interpreted as a rational response to information, (2) does not decrease as a result of experience with a good, (3) is not necessarily reduced by market forces, and (4) is not unique to cash prices. The results imply that demand curves estimated from market data need not reveal true consumer preferences, in any normatively signiŽcant sense of the term.