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Consumer Choices Under Small Probabilities: Overweighting or Underweighting?

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  • Rong Chen
  • Jianmin Jia

Abstract

This article provides a theoretical account and identifies boundary conditions for the common beliefs about the “overweighting of small probabilities”. Based on four studies, our results suggest that the weighting of probabilities is context-dependent. When the contrast in value is reduced or not presented in a decision problem, small probabilities are less likely to be overweighted. In addition, as the associated payoffs increase, the weights on small probabilities tend to diminish or even to be “underweighted”. However, there is an “interpersonal difference” in the weighting of probabilities which reflects the particular circumstances of individuals, including their wealth status. Some implications of small probabilities for marketing practices are also investigated and discussed. Copyright Springer Science + Business Media, Inc. 2005

Suggested Citation

  • Rong Chen & Jianmin Jia, 2005. "Consumer Choices Under Small Probabilities: Overweighting or Underweighting?," Marketing Letters, Springer, vol. 16(1), pages 5-18, January.
    • Handle: RePEc:kap:mktlet:v:16:y:2005:i:1:p:5-18
    DOI: 10.1007/s11002-005-1137-7
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    Cited by:

    1. Qiuling Luo & Chen Qu, 2013. "Comparison Enhances Size Sensitivity: Neural Correlates of Outcome Magnitude Processing," PLOS ONE, Public Library of Science, vol. 8(8), pages 1-9, August.
    2. Sophie Clot & Gilles Grolleau & Lisette Ibanez, 2016. "Do good deeds make bad people?," European Journal of Law and Economics, Springer, vol. 42(3), pages 491-513, December.
    3. Nayga, Rodolfo M., Jr. & Shaw, W. Douglass & Silva, Andres, 2006. "The Effect of Risk Presentation on Product Valuation: An Experimental Analysis," 2006 Annual meeting, July 23-26, Long Beach, CA 21429, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).

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