Ex. 4_Solutions - 9/17/2007 CONSUMER BEHAVIOR Exercise 4:...

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9/17/2007 CONSUMER BEHAVIOR Exercise 4: Biases in Judgment (a) Rather than reduce prices by $500 a car manufacturer offers a $500 rebate on all cars sold during a promotion period. Name of bias : Silver Lining Principle How action affects consumers : Essentially, a rebate automatically signals a sense of savings to the consumer and makes them feel like they’re getting a good deal. For example, reducing the price of a car from $32,650 to $32,150 would have no real effect on a consumer, but by essentially giving consumers a “free $500” to purchase a car, a they will be more likely to buy. (b) A restaurateur with a casual dining restaurant decides to offer only 6 different bottles of red wine and 6 different bottles of white wine on his menu rather than offer a wider selection like his nearest competitor whose wine list contains over 50 different bottles of wine. Name of bias: “Less is more” How action affects consumers : Too many choices tend to overwhelm a consumer and will lead them to either make the decision that they will regret least or even no decision at
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Ex. 4_Solutions - 9/17/2007 CONSUMER BEHAVIOR Exercise 4:...

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