Opportunity Cost Overestimation

Journal of Marketing Research · 2019-04-11 · 6 citations

Consumers often fail to utilize desirable offers they had originally selected and planned to use and thus later regret missing out on them. This failure to follow through induces an opportunity cost. In contrast to prior research findings that opportunity costs tend to be underestimated, the authors propose that in situations where the need to choose arises from external rather than internal constraints, opportunity costs may actually be overestimated. Consumers view choice constraints as external when the necessity to trade off one option for another relates to extraneous resource limitations (e.g., whenever time, budget, or space constraints necessitate choosing between two desirable offers). Conversely, consumers perceive choice constraints as internal when that trade-off is “built-in” (e.g., when a marketing incentive requires choosing between two desirable offers). Five studies demonstrate that choosing on the basis of an external constraint induces consumers to imagine ways in which they can utilize all of the competing options in the choice set. Consequently, consumers feel that by failing to utilize their chosen option, they simultaneously miss out on all options (although in actuality they could have realized only one of those options). Consistent with this conceptualization, only consumers who want to use all of the choice set options simultaneously demonstrate opportunity cost overestimation.

Does Financial Regulation Unintentionally Ignore Less Privileged Populations? The Investigation of a Regulatory Fintech Advancement, Objective and Subjective Financial Literacy

RePEc: Research Papers in Economics · 2019-01-01 · 2 citations

In 2013-2015, the Israeli insurance and long term savings regulator reached out to the Israeli population, recommending the use of a new centralized Internet portal created by the regulator to help individuals find inactive retirement plans and withdraw inactive funds. We find that the government's effort did not result in withdrawals of the majority of the accounts, and did not reach all subpopulations equally. Provident fund records indicate that those who took action and withdrew funds following the campaign live in central locations that have higher socioeconomic rankings, and they are relatively older. Using survey data, we found evidence that those with low financial literacy and confidence in their knowledge of retirement planning and the unemployed were less likely to have been aware of the financial regulatory campaigns. It seems that confidence in one's financial knowledge is more important for financial action than objective literacy. The survey further shows the importance of gender, age, education, and immigration status. We conclude that less privileged populations were less likely to have been aware of the campaign, to enter the Internet portal, and to have taken action based on the information.

Bringing (Contingent) Loss Aversion Down to Earth — A Comment on Gal & Rucker's Rejection of “Losses Loom Larger Than Gains”

Journal of Consumer Psychology · 2018-03-30 · 16 citations

Although we disagree with some of Gal and Rucker's (2018 – this issue) specific evidence and with their overstated conclusion regarding loss aversion, their overarching message makes a worthwhile contribution. In particular, loss aversion is less robust and universal than has been assumed while its most prominent empirical support — the endowment effect and the status quo bias — is susceptible to multiple alternative explanations. Instead of accepting loss aversion as true unless proven otherwise, we should treat it like other decision properties and psychological accounts that are contingent on various moderators and call for an analysis of psychological mechanisms. In this commentary, we suggest that gatekeepers, such as reviewers, tend to favor loss aversion and other widely accepted tendencies, while demanding a much higher support‐threshold for alternative or newer accounts. Although building on prior theories and concepts is of course important, the bias in favor of incumbent assumptions can impede scientific progress, bar new ideas from the literature, and reinforce well‐established but contingent notions that may apply under some conditions but not others.

13-H: the Consumption of Digital Live Content: How Live Streaming Enhances Interest in Uninteresting Content

ACR North American Advances · 2017-01-01 · 1 citations

2Hyperopia

2017-10-30 · 1 citations

This chapter examines hyperopia, a research paradigm that challenges the universality of myopia and demonstrates that people often suffer from a reverse self-control problem characterized by excessive psychological farsightedness and over-control. It presents hyperopia as a general theory of reverse self-control and discusses empirical evidence for excessive farsightedness, its underlying processes, and its consequences for human decision-making, behavior, and wellbeing. The chapter describes how people cope with their hyperopic preferences and tendencies. The existence of hyperopia is not only demonstrated through people’s over-control but is also implied by the counteractions they take to remedy their excessive farsightedness. Hyperopia and the accompanying need to precommit to indulgence arise in large part from the inherent disadvantage of hedonic luxuries or relative vices compared to utilitarian necessities or relative virtues. Hyperopia is likely to be especially acute when people vividly remember, experience, or anticipate the guilt emanating from their choice or consumption of indulgences.

Acquisition Mode Effect on Consumer Product Evaluation and Tradeoff Making

ACR North American Advances · 2016-01-01

Motivating Persistence and Risky Choice: Beyond Monetary Incentives

ACR North American Advances · 2016-01-01

The Functional Alibi

Journal of the Association for Consumer Research · 2016-09-07 · 39 citations

Spending money on hedonic luxuries often seems wasteful, irrational, and even immoral. We propose that adding a small utilitarian feature to a luxury product can serve as a functional alibi, justifying the indulgent purchase and reducing indulgence guilt. We demonstrate that consumers tend to inflate the value, and usage frequency, of utilitarian features when they are attached to hedonic luxuries. Using a mixed-method approach, combining archival data (an analysis of over 1,000 online reviews of handbags) with studies conducted in the field and laboratory, we establish the functional alibi effect and show that it is mediated by guilt and more likely to occur when the luxury purchase is perceived as frivolous and expensive, and when the purchase is for oneself rather than a gift. We explore the effect of adding a functional alibi in a variety of marketing contexts, and we examine various consumer populations representing diverse demographics.

Complicating Decisions: The Work Ethic Heuristic and the Construction of Effortful Decisions

ScholarlyCommons (University of Pennsylvania) · 2016-03-01

The notion that effort and hard work yield desired outcomes is ingrained in many cultures and affects our thinking and behavior. However, could valuing effort complicate our lives? In the present article, the authors demonstrate that individuals with a stronger tendency to link effort with positive outcomes end up complicating what should be easy decisions. People distort their preferences and the information they search and recall in a manner that intensifies the choice conflict and decisional effort they experience before finalizing their choice. Six experiments identify the effort-outcome link as the underlying mechanism for such conflict-increasing behavior. Individuals with a stronger tendency to link effort with positive outcomes (e.g., individuals who subscribe to a Protestant Work Ethic) are shown to complicate decisions by: (a) distorting evaluations of alternatives (Study 1); (b) distorting information recalled about the alternatives (Studies 2a and 2b); and (3) distorting interpretations of information about the alternatives (Study 3). Further, individuals conduct a superfluous search for information and spend more time than needed on what should have been an easy decision (Studies 4a and 4b).

Blink and You'll Miss It: the Consequences of Ephemeral Messaging

ACR North American Advances · 2016-01-01