The Ease of Computation Effect: The Interplay of Metacognitive Experiences and Naive Theories in Judgments of Price Differences

Abstract:     
Consumers' judgments concerning the magnitude of numerical differences are influenced by the ease of mental computations. Results from a set of experiments show that ease of computation can affect judgments of the magnitude of price differences, discount magnitudes, and brand choices. Participants seem to believe that it is easier to judge the size of a larger difference than that of a smaller difference. In the absence of appropriate corrective steps, this naive belief can lead to systematic biases in judgments. For example, when presented with two pairs of numbers, participants incorrectly judged the magnitude of the difference to be smaller for pairs with difficult computations (e.g., 4.97 - 3.96; arithmetic difference 1.01) than for pairs with easy computations (e.g., 5.00 - 4.00; arithmetic difference 1.00). The effect does not manifest when judgments do not entail mental computations or when participants are made aware that the ease or difficulty is caused by computational complexity. Further, this effect was mitigated when we manipulated participants' prior experience in a learning phase of the experiment. The results have implications for buyers and sellers, and for the understanding of the role of meta-cognitive experiences in numerical judgments.

Number of Pages in PDF File: 36

Keywords: Fluency, Behavioral Pricing, Consumer Psychology

Accepted Paper Series