Unravelling theory in choice analysis: do consumers fill in the blanks?

Abstract

Unravelling theory postulates that consumers assume products without quality information are of the lowest quality. In a discrete choice experiment (DCE) with 1987 respondents from the UK, we find evidence against this assumption. Affirmative disclosure, which indicates only quality above the lowest level, lowers marginal utilities compared to complete disclosure. The development in food choice DCE studies, from textual and complete towards visual and affirmative increases mean willingness to pay and error variance. This suggests that analysts should carefully consider how attributes are presented when designing DCEs to avoid biased welfare estimates, especially when aiming for accurate market predictions or policy advice.