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Convexity Neglect in Consumer Decision Making

Author

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  • Tsiros, Michael
  • Chen, Haipeng (Allan)

Abstract

Purchase decisions occasionally involve ratio calculations (e.g., calories per serving). When faced with decisions that involve information presented in such formats, consumers often ignore the convexity inherent in these calculations and rely on the more intuitive arithmetic mean rather than the correct harmonic mean in averaging ratios. In three studies, we show that convexity neglect systematically affects consumers' judgment and leads to suboptimal choices. In addition, we provide evidence that convexity neglect is a result of individuals' use of a wrong mental model substituting the arithmetic mean for the harmonic mean, rather than their lack of computational skills or motivation, to conduct the necessary calculations.

Suggested Citation

  • Tsiros, Michael & Chen, Haipeng (Allan), 2017. "Convexity Neglect in Consumer Decision Making," Journal of Marketing Behavior, now publishers, vol. 2(4), pages 253-290, April.
    • Handle: RePEc:now:jnljmb:107.00000037
    DOI: 10.1561/107.00000037
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    Cited by:

    1. Kunter Gunasti & Haipeng (Allan) Chen, 2023. "Consumer misestimations of small recurring changes vs. a single large lump sum," Marketing Letters, Springer, vol. 34(4), pages 605-617, December.
    2. Ola Svenson & Nichel Gonzalez & Gabriella Eriksson, 2018. "Different heuristics and same bias: A spectral analysis of biased judgments and individual decision rules," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 13(5), pages 401-412, September.
    3. repec:cup:judgdm:v:13:y:2018:i:5:p:401-412 is not listed on IDEAS

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