lecture 4 context effect

lecture 4 context effect - Econ 490 ECONOMICS and...

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Econ 490 Yusufcan Masatlioglu Econ 490 ECONOMICS and PSYCHOLOGY (Behavioral Economics) Lecture 4
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Econ 490 Yusufcan Masatlioglu Context Effect Brumer and Minturn, 1955
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Econ 490 Yusufcan Masatlioglu Context Effect Brumer and Minturn, 1955
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Marketing A central question for sales managers and marketing experts is how customers choose among several alternatives. This is crucial in order to predict market shares and especially to predict how market shares change if new products are introduced or old ones are withdrawn from the market Econ 490 Yusufcan Masatlioglu
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Hsee (1996) Joint evaluations (JE) or the simultaneous consideration of two options versus separate evaluations (SE) of each option in isolation. Example: How attractive are the following pay schemes – self $5 and other $5 or self $6 and other $15. Which would you prefer? The evaluability of an attribute that is continuous depends on knowledge of average, best and worst values. It reflects the desirability of an attribute value in a given decision context. 5
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6 Hsee (1998) + When is less be2er? Hsee et al. + 2 The evaluability hypothesis: When an option is judged in isolation, the judgment is influenced more by the attributes that are easy to evaluate alone. In joint evaluation, the options serve as the most salient reference for evaluating each other and can shift the attributes used. 10oz 8oz 5oz 7oz Vendor H Vendor L Vendor H Vendor L Separate Evaluation $1.80 $2.23 Joint Evaluation $2.02 $1.81
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Hsee et al. (1999) +3 Judging from different categories. Judging options within a category versus judging options from different categories. Within a category, objects judged relative to the category norm. A high-positioned member in a low (important) category may be judged higher than a low-positioned member in a high (important) category. Insensitivity to magnitude (scope) Which mode is better? Most researchers would argue for JE. Why? Why might SE be best? 7
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Regularity The most fundamental assumption with respect to choice among several alternatives is regularity. Regularity requires that the probability that an alternative is chosen does not increase if the choice set is expanded.
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