IDEAS home Printed from https://ideas.repec.org/a/plo/pone00/0214098.html
   My bibliography  Save this article

The effect of switching costs on choice-inertia and its consequences

Author

Listed:
  • Nathaniel J S Ashby
  • Kinneret Teodorescu

Abstract

In two studies we provide a novel investigation into the effects of monetary switching costs on choice-inertia (i.e., selection of the same option on consecutive choices). Study 1 employed a static decisions-from-feedback task and found that the introduction of, as well as larger, monetary switching costs led to increases in choice-inertia. While experience and decreases in the similarity of options average payouts (expected value: EV) increased choice-inertia for the option with a higher EV (the EV maximizing option), switching costs increased choice-inertia for the inferior option (the lower EV option): The proportion of total participants showing choice-inertia for the EV maximizing option also increased with switching costs. Study 2 employed a dynamic decisions-from-feedback task where halfway through the task the EV maximizing option became the inferior option. The effect of switching costs increasing choice-inertia for both the EV maximizing and the inferior option was replicated with little impact of the change in options values being detected. In sum, decision makers appear to be sensitive to switching costs, and this sensitivity can bias them towards inferior or superior options, revealing the good and the bad of choice-inertia.

Suggested Citation

  • Nathaniel J S Ashby & Kinneret Teodorescu, 2019. "The effect of switching costs on choice-inertia and its consequences," PLOS ONE, Public Library of Science, vol. 14(3), pages 1-18, March.
    • Handle: RePEc:plo:pone00:0214098
    DOI: 10.1371/journal.pone.0214098
    as

    Download full text from publisher

    File URL: https://journals.plos.org/plosone/article?id=10.1371/journal.pone.0214098
    Download Restriction: no
    File URL: https://journals.plos.org/plosone/article/file?id=10.1371/journal.pone.0214098&type=printable
    Download Restriction: no
    File URL: https://libkey.io/10.1371/journal.pone.0214098?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Busemeyer, Jerome R. & Swenson, Kenneth N. & Lazarte, Alejandro, 1986. "An adaptive approach to resource allocation," Organizational Behavior and Human Decision Processes, Elsevier, vol. 38(3), pages 318-341, December.
    2. William J. Luther, 2016. "Cryptocurrencies, Network Effects, And Switching Costs," Contemporary Economic Policy, Western Economic Association International, vol. 34(3), pages 553-571, July.
    3. Banks, Jeffrey S & Sundaram, Rangarajan K, 1994. "Switching Costs and the Gittins Index," Econometrica, Econometric Society, vol. 62(3), pages 687-694, May.
    4. Jerker Denrell & James G. March, 2001. "Adaptation as Information Restriction: The Hot Stove Effect," Organization Science, INFORMS, vol. 12(5), pages 523-538, October.
    5. Duijmelinck, Daniëlle M.I.D. & Mosca, Ilaria & van de Ven, Wynand P.M.M., 2015. "Switching benefits and costs in competitive health insurance markets: A conceptual framework and empirical evidence from the Netherlands," Health Policy, Elsevier, vol. 119(5), pages 664-671.
    6. repec:cup:judgdm:v:1:y:2006:i::p:23-32 is not listed on IDEAS
    7. Samuelson, William & Zeckhauser, Richard, 1988. "Status Quo Bias in Decision Making," Journal of Risk and Uncertainty, Springer, vol. 1(1), pages 7-59, March.
    8. Avinash Dixit, 1992. "Investment and Hysteresis," Journal of Economic Perspectives, American Economic Association, vol. 6(1), pages 107-132, Winter.
    9. Azar, Ofer H., 2014. "The default heuristic in strategic decision making: When is it optimal to choose the default without investing in information search?," Journal of Business Research, Elsevier, vol. 67(8), pages 1744-1748.
    10. Arkes, Hal R. & Blumer, Catherine, 1985. "The psychology of sunk cost," Organizational Behavior and Human Decision Processes, Elsevier, vol. 35(1), pages 124-140, February.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Heng Xu & Jingru Wang & Zhaodan Tai & Hao-Chiangkoong Lin, 2021. "Empirical Study on the Factors Affecting User Switching Behavior of Online Learning Platform Based on Push-Pull-Mooring Theory," Sustainability, MDPI, vol. 13(13), pages 1-16, June.
    2. Anne Yenching Liu & Sungmin Lin, 2023. "Service for specialized and digitalized: Consumer switching perceptions of E‐commerce in specialty retail," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(3), pages 1521-1533, April.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sleesman, Dustin J., 2019. "Pushing through the tension while stuck in the mud: Paradox mindset and escalation of commitment," Organizational Behavior and Human Decision Processes, Elsevier, vol. 155(C), pages 83-96.
    2. Louis Lévy-Garboua & Claude Montmarquette, 1996. "Cognition In Seemingly Riskless Choices And Judgments," Rationality and Society, , vol. 8(2), pages 167-185, May.
    3. H. Henry Cao & Bing Han & David Hirshleifer & Harold H. Zhang, 2011. "Fear of the Unknown: Familiarity and Economic Decisions," Review of Finance, European Finance Association, vol. 15(1), pages 173-206.
    4. David Hirshleifer & Ivo Welch, 2002. "An Economic Approach to the Psychology of Change: Amnesia, Inertia, and Impulsiveness," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 11(3), pages 379-421, September.
    5. Kuhberger, Anton, 1998. "The Influence of Framing on Risky Decisions: A Meta-analysis," Organizational Behavior and Human Decision Processes, Elsevier, vol. 75(1), pages 23-55, July.
    6. Sandri, Serena & Schade, Christian & Mußhoff, Oliver & Odening, Martin, 2010. "Holding on for too long? An experimental study on inertia in entrepreneurs' and non-entrepreneurs' disinvestment choices," Journal of Economic Behavior & Organization, Elsevier, vol. 76(1), pages 30-44, October.
    7. Stephan Billinger & Kannan Srikanth & Nils Stieglitz & Terry R. Schumacher, 2021. "Exploration and exploitation in complex search tasks: How feedback influences whether and where human agents search," Strategic Management Journal, Wiley Blackwell, vol. 42(2), pages 361-385, February.
    8. Willem Smit, 2023. "Top Manager Heuristics Under Knightian Uncertainty: Control Versus Prediction and the Moderating Impact of Framing," Journal of Management Studies, Wiley Blackwell, vol. 60(5), pages 1302-1340, July.
    9. repec:cup:judgdm:v:14:y:2019:i:6:p:721-727 is not listed on IDEAS
    10. Kovic, Marko, 2020. "Rationalität in der Praxis: Definitionen, Herausforderungen, Optimierungsstrategien," SocArXiv a9436, Center for Open Science.
    11. Bragger, Jennifer DeNicolis & Bragger, Donald & Hantula, Donald A. & Kirnan, Jean, 1998. "Hyteresis and Uncertainty: The Effect of Uncertainty on Delays to Exit Decisions," Organizational Behavior and Human Decision Processes, Elsevier, vol. 74(3), pages 229-253, June.
    12. Xiaoyang Long & Javad Nasiry & Yaozhong Wu, 2020. "A Behavioral Study on Abandonment Decisions in Multistage Projects," Management Science, INFORMS, vol. 66(5), pages 1999-2016, May.
    13. Dmitry Khanin & Raj V. Mahto, 2013. "Do Venture Capitalists Have a Continuation Bias?," Journal of Entrepreneurship and Innovation in Emerging Economies, Entrepreneurship Development Institute of India, vol. 22(2), pages 203-222, September.
    14. He, Xin & Mittal, Vikas, 2007. "The effect of decision risk and project stage on escalation of commitment," Organizational Behavior and Human Decision Processes, Elsevier, vol. 103(2), pages 225-237, July.
    15. Kathryn Kadous & Lisa M. Sedor, 2004. "The Efficacy of Third†Party Consultation in Preventing Managerial Escalation of Commitment: The Role of Mental Representations," Contemporary Accounting Research, John Wiley & Sons, vol. 21(1), pages 55-82, March.
    16. Conor Keegan & Conor Teljeur & Brian Turner & Steve Thomas, 2019. "Switching benefits and costs in the Irish health insurance market: an analysis of consumer surveys," International Journal of Health Economics and Management, Springer, vol. 19(1), pages 15-32, March.
    17. Frederiks, Elisha R. & Stenner, Karen & Hobman, Elizabeth V., 2015. "Household energy use: Applying behavioural economics to understand consumer decision-making and behaviour," Renewable and Sustainable Energy Reviews, Elsevier, vol. 41(C), pages 1385-1394.
    18. Hämäläinen, Raimo P. & Lahtinen, Tuomas J., 2016. "Path dependence in Operational Research—How the modeling process can influence the results," Operations Research Perspectives, Elsevier, vol. 3(C), pages 14-20.
    19. Julia Blasch & Claudio Daminato, 2018. "Behavioral anomalies and energy-related individual choices: the role of status-quo bias," CER-ETH Economics working paper series 18/300, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    20. Marek Banczyk & Joanne Laban & Jason Potts, 2018. "Choosing cities: a behavioural economic approach," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 61(3), pages 463-477, November.
    21. Navon, David & Kaplan, Todd & Kasten, Ronen, 2013. "Egocentric framing - one way people may fail in a switch dilemma: Evidence from excessive lane switching," MPRA Paper 50032, University Library of Munich, Germany.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:plo:pone00:0214098. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: plosone (email available below). General contact details of provider: https://journals.plos.org/plosone/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.