Ambiguity Aversion and the Power of Established Brands

This paper investigates situations in which a sizeable subset of consumers prefers an established brand featuring inferior attributes to a less-established brand featuring superior attributes. Established brands are those for which consumers hold more confident beliefs about the benefits (although their specific attributes might be worse than those of competing, less-established brand). We propose that ambiguity aversion, as proposed in the literature on decision making under uncertainty drives the preference for a “dominated” established brand. In nine experiments, we examine the role of ambiguity aversion in the preference for a dominated, established brand. We first show that there is a correlation between ambiguity aversion (revealed through choices among monetary gambles) and the preference for established brands. We then show that the preference for established brands is enhanced when ambiguity aversion is made more salient in unrelated preceding choices. To further study the ambiguity-reducing properties of established brands, the last two experiments assign brand names to monetary gambles, and established brands appear to increase the likelihood of choosing ambiguous gambles. Overall, this research suggests that consumers’ tendency of ambiguity aversion may at least partly drive preference for dominated, established brands and thus indirectly help their brand equity.

Citation:

A. V. Muthukrishnan, Luc Wathieu, and Alison Jing Xu (2009) ,"Ambiguity Aversion and the Power of Established Brands", in AP - Asia-Pacific Advances in Consumer Research Volume 8, eds. Sridhar Samu, Rajiv Vaidyanathan, and Dipankar Chakravarti, Duluth, MN : Association for Consumer Research, Pages: 341-341.