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
Date Written: February 27, 2017
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
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