Convexity Neglect in Consumer Decision Making

Michael Tsiros and Haipeng (Allan) Chen (2017), 'Convexity Neglect in Consumer Decision Making', Journal of Marketing Behavior: Vol. 2: No. 4, pp 253-290. DOI: 10.1561/107.00000037

38 Pages Posted: 20 Sep 2019

See all articles by Michael Tsiros

Michael Tsiros

University of Miami - Department of Marketing

Haipeng (Allan) Chen

University of Kentucky - Gatton College of Business and Economics

Date Written: February 27, 2017

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.

Keywords: convexity; numeracy; averaging; ratio; harmonic mean; arithmetic mean

Suggested Citation

Tsiros, Michael and Chen, Haipeng (Allan), Convexity Neglect in Consumer Decision Making (February 27, 2017). Michael Tsiros and Haipeng (Allan) Chen (2017), 'Convexity Neglect in Consumer Decision Making', Journal of Marketing Behavior: Vol. 2: No. 4, pp 253-290. DOI: 10.1561/107.00000037, Available at SSRN: https://ssrn.com/abstract=3361260

Michael Tsiros (Contact Author)

University of Miami - Department of Marketing ( email )

United States

Haipeng (Allan) Chen

University of Kentucky - Gatton College of Business and Economics ( email )

550 South Limestone
Lexington, KY 40506
United States

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