Behavioral Decision Research: Theory and Applications

Citation:

Ravi Dhar (1993) ,"Behavioral Decision Research: Theory and Applications", in NA - Advances in Consumer Research Volume 20, eds. Leigh McAlister and Michael L. Rothschild, Provo, UT : Association for Consumer Research, Pages: 195.

Advances in Consumer Research Volume 20, 1993      Page 195

BEHAVIORAL DECISION RESEARCH: THEORY AND APPLICATIONS

Ravi Dhar, Yale School of Management

Since the advancement of the notion of bounded rationality by Herbert Simon, the field of descriptive decision theory has attempted to document evidence to define more precisely the bounds of human rationality and show that contrary to the assumptions of classical economic theory, consumers do not necessarily maximize utility. This viepoint of of consumers' decision making is consistent with the growing consensus among decision researchers that consumer preferences are often fuzzy, unstable, and inconsistent (Tversky, Sattah, and Slovic 1988; Payne, Bettman, and Johnson 1992). Consumers are depicted as constructing and expressing rankings with respect to the possibilities that they have actually considered (Dhar 1992). Such an idea makes choices sensitive to various aspects of the decision situation: the different contexts and tasks highlight different aspects of the options and suggest different considerations, often giving rise to inconsistent decisions (Tversky and Simonson 1992).

While the constructive view of individual decision making is becoming well established within consumer research, the findings have not had a similar impact on broader marketing issues. The four papers in the session differ in their degree of theoretical-applied orientation. The first paper (Hardie, Johnson, and Fader) shows how findings of loss aversion in multiattribute riskless choices observed in laboratory situations can be extended to understand its implication for market level phenomena. The authors argue that since consumers often evaluate products in relation to some reference levels, such a process may create an asymmetry in evaluation depending on whether the value is seen as a gain or a loss from the reference level. The authors analyze scanner panel data to show how a reference dependent model of consumer choice provides a better fit in estimation and forecast periods compared to a standard multinomial logit model.

The second paper (Inman and Dyer) proposes an extended paradigm of consumer satisfaction based on generalized utility theory. Building on research in decision theory, the authors propose and test a modle of satisfaction that includes the effect of foregone outcomes. The authors contend that such a description of consumer satisfaction has distinct advantages over the existing framework in: 1) resolving key ambiguities reported in the past research and 2) extending satisfaction from a post-consumption construct to a pre-consumption measure.

The third paper (Hawkins and Fischer) uses the well known contingent weighting framework in explaining how consumers make difficult choices. The authors question the normative principle of "procedure invariance" which assumes that strategically equivalent ways of assessing preferences should result in the same preference order. The authors propose two strategies that may account for the violations: scale compatibility and strategy compatibility. On testing the alternative strategies in a series of four experiments in a binary consumer choice task, they find strong support only for strategy compatibility.

The fourth paper (Dhar) examines the role of motivational based mechanisms using an information processing framework, a relatively neglected area of research. The author questions the premise that choices between relatively equally attractive alternatives create a state of indifference. The preferences among such alternatives exhibit behavior that systematically violates the theory of rational choice. The results emphasize the importance of the role of anticipated emotions and justification process in choice.

When taken as a group, the papers in the session should help to highlight some of the promising avenues that are emerging in this area of research.

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