Tag Archives: Behavioral Decision Theory

Cases

Asians love making choices

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Many Asians live on rice rather than bread. Since it used to sell in heavy bags, they did not have options to choose. However, people nowadays decrease the amount of food to consume and increase the diversity of means to enjoy. A wide variety of small-portion “meal kits” become highly popular. Certainly, rice is not exceptional.

When I visited Tokyo, Japan, I found a store called Akomeya in Shinjuku area. This store is located across Blue Bottle and has more customers than it. When I entered this store out of curiosity, I found it sells small packages of numerous types of rice. In Akomeya, customers could make a choice out of many options, which does not usually happen when buying rice.

Although freedom of choice may not be a pillar of Western culture any more, it may still be attractive for Asians.

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Reference 1

Mochon, D. (2013). Single-Option Aversion. Journal of Consumer Research, 40(3), 555–566.

This article documents single-option aversion, an increase in consumers’ desire to search when faced with a single option. This effect can lead to a product being chosen more often when competing alternatives are included in the choice set, contrary to various rational models of search, as well as to recent research on choice conflict showing that additional options can lead to higher deferral rates. A series of lab studies document this effect, differentiate it from other context effects, and test some of its boundary conditions. The results suggest that single-option aversion is not driven by the information provided by the additional options, that the desire to search is critical for this effect to occur, and that the effects of single- option aversion are not limited to the immediate choice set. These results have both practical and theoretical implications for the understanding of consumer search and choice deferral.

Indeed, in a more recent study with over 7,000 participants from six countries, researchers found that choice deprivation—a feeling of not having enough to choose from—not choice overload is the most common consumer experience in both trivial and highly consequential domains. And choice deprivation isn’t just more common—it’s also more harmful to choice satisfaction than overload.

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Reference 2

Reutskaja, E., Cheek, N. N., Iyengar, S., & Schwartz, B. (2022). Choice Deprivation, Choice Overload, and Satisfaction with Choices Across Six Nations. Journal of International Marketing, 30(3), 18–34.

Whether consumers have too little, too much, or the ideal amount of choice can have profound consequences. The present research explores patterns of choice deprivation (having less choice than desired) and choice overload (having more choice than desired) across six choice domains in six countries that together provide home to about half the human population (Brazil, China, India, Japan, Russia, and the United States; combined N = 7,436). In most domains in most countries, choice deprivation was the norm—only in the United States was choice overload commonly reported. Deprivation was also more strongly related to decreased satisfaction with choices than was overload, suggesting that choice deprivation can be both more common and more consequential than overload. The present research has implications for “inverted U-shape” theories of consumer choice experiences and underlines the need for more diverse samples, including cross-cultural samples, in research on choice deprivation and overload.

Cases

Donate in cash or by credit card

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We often pay in cash or by credit card. Differently from cash, credit card often leads us to over-consumption. This is because credit card does not require us to write down the amount paid (rehearsal) and our wealth is not depleted immediately rather than with a delay (immediacy) (Soman 2001).

We could also donate in cash or by credit card. For example, visitors at the Tate Liverpool in UK could donate 4 pounds by inserting bills into a silver box or tapping their credit cards on a white device. Which donation mechanism benefits the museum better?

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Reference

Soman, D. (2001). Effects of payment mechanism on spending behavior: The role of rehearsal and immediacy of payments. Journal of Consumer Research, 27(4), 460-474.

Past expenses have been shown to influence future spending behavior by depleting available budgets. However, a prerequisite for this relationship is the accurate recall of past payments and the experiencing of the full aversive impact associated with them. This article shows that the use of different payment mechanisms influences both these factors and hence moderates the effects of past payments on future spending. Specifically, past payments strongly reduce purchase intention when the payment mechanism requires the consumer to write down the amount paid (rehearsal) and when the consumer’s wealth is depleted immediately rather than with a delay (immediacy). Two experiments show support for the proposed theoretical framework.

Publications

Preference reversal of environmental friendly product

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Joo @ PHBS

  • “Preference Reversal of Environmental Friendly Product,” Presented at the HSBC Business School, Peking University, ShenZhen: China, October 30, 2013.

Do consumers like the environmental friendly products they buy? My colleague, Bohee, and I borrow the literature from the Behavioral Decision Theory and argue this is not always the case; consumers often choose the green product even though it does not work well. This suggests that, in some cases, environmental friendliness could be merely a marketing gimmick.

 PHBS

Cases

What is the right choice for museum curators?

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DML_Boston

While I stayed in Boston for the conference, I visited Museum of Fine Arts (MFA), Boston and met an intriguing decision-making question. I took a picture of a panel titled Making Choices which says,

Every gallery represents a long series of choices. Who decides which works go on view and how they should be arranged? What factors go into making that decision? Does the Museum have consistent guidelines about what should be on view — or do the rules change from gallery to gallery?

Ultimately, the MFA’s curators are responsible for deciding what you see in the galleries, for making choices from the Museum’s rich collections that do justice to the art and engage the viewer. Context is key — what is the story to be told? Should the gallery be a survey of a whole period or should it showcase just a few artists in depth? Should it provide variety or set up close comparisons? Re-create a sense of a historical period, focus on a specific style, or feature that character of individual objects? Curators work with a team of designers and educators in considering these issues and making these decisions.

And finally there is the question of quality. Which works are the most compelling? In which are the artist’s skills most effectively employed? Where are materials used with the greatest sophistication or technical ability? And what about condition: does the work still represent the artist’s intent at the time it was made?

Indeed, curators face a decision-making task regarding how to display an artifact. Do they complete the artifact to restore its original appearance (e.g., sofa with hypothetical cushions) or do they remain the artifact as-is for further studies (e.g., sofa frame only)? Unfortunately, there is no right answer for this question. I wish some behavioral decision theory researchers discuss this issue seriously.

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Reference

Einhorn, H. J., & Hogarth, R. M. (1981). Behavioral decision theory: Processes of judgement and choice. Annual review of psychology, 32(1), 53-88.