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Research Note--Should Consumers Use the Halo to Form Product Evaluations?

Author

Listed:
  • Peter Boatwright

    (Tepper School of Business, Carnegie Mellon University, Pittsburgh, Pennsylvania 15213)

  • Ajay Kalra

    (Tepper School of Business, Carnegie Mellon University, Pittsburgh, Pennsylvania 15213)

  • Wei Zhang

    (Altus Pharmaceuticals, Cambridge, Massachusetts 02139)

Abstract

In purchase situations where attribute information is either missing or difficult to judge, a well-known heuristic that consumers use to form evaluations is the halo effect. The psychology literature has widely considered the halo a reflection of consumers' inability to discriminate between different attributes and have therefore labeled it the "halo error" or the "logical error." The objective of this paper is to offer a rationale for the halo effect. We use a decision-theory framework to show that the halo is consistent with the goal of minimizing estimation risk. Contrary to conventional wisdom, we demonstrate that a decision using the halo has lower estimation risk compared to not using the halo heuristic. Therefore, using the halo results in utility maximization and is indicative of rational behavior.

Suggested Citation

  • Peter Boatwright & Ajay Kalra & Wei Zhang, 2008. "Research Note--Should Consumers Use the Halo to Form Product Evaluations?," Management Science, INFORMS, vol. 54(1), pages 217-223, January.
    • Handle: RePEc:inm:ormnsc:v:54:y:2008:i:1:p:217-223
    DOI: 10.1287/mnsc.1070.0742
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    References listed on IDEAS

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    Cited by:

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    3. Mark A. Andor, Andreas Gerster, and Stephan Sommer, 2020. "Consumer Inattention, Heuristic Thinking and the Role of Energy Labels," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1).
    4. Lee, Richard & Lockshin, Larry, 2011. "Halo effects of tourists’ destination image on domestic product perceptions," Australasian marketing journal, Elsevier, vol. 19(1), pages 7-13.
    5. Md. Sumon Hossain & Md. Johir Rayhan & Maeen Uddin & S.M. Masudur Rahman, 2023. "Analyzing the Level of CSR Practices in Relation to Customer Satisfaction in the Context of Banking Industry in Bangladesh," International Journal of Economics and Financial Issues, Econjournals, vol. 13(4), pages 92-101, July.
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    9. Sebastien Houde & Joseph E. Aldy, 2017. "The Efficiency Consequences of Heterogeneous Behavioral Responses to Energy Fiscal Policies," CER-ETH Economics working paper series 17/282, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
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