Effects of Providing Total Cost of Ownership Information on Attribute Weights in Purchasing Decisions

KUL Working Paper No. MO 0601

41 Pages Posted: 14 Nov 2006

See all articles by Sebastiaan Morssinkhof

Sebastiaan Morssinkhof

University of Twente

Marc Wouters

Karlsruhe Institute of Technology; University of Amsterdam Business School

Luk Warlop

KU Leuven - Faculty of Business and Economics (FEB); BI Norwegian Business School

Date Written: 2006

Abstract

In this paper we investigate how the provision of total cost of ownership (TCO) information affects attribute weights in sourcing decisions, and how this effect is moderated by decision complexity. TCO quantifies the costs of each decision alternative for purchasing decisions, from the perspective of the buying organization. We consider incomplete TCO information, in that some non-financial attributes are not included in the TCO calculation, and we investigate unintended (and potentially disadvantageous) effects of providing decision makers with such information. Experiments with 817 participants were conducted, both students and managers. We found moderate support for the hypothesis, that when complexity was low, participants gave a higher weight to the attribute that was excluded from the TCO information. We found support for the hypothesis that when complexity was high, decision makers gave less weight to this attribute, but this result was only found for the most experienced subgroup of managers. Experience did, however, not necessarily have a positive effect. Results suggest that, due to the provision of TCO information, experienced decision makers were more likely to follow an evaluation process in which less attention was paid to attributes that were not part of the TCO calculation. This suggests that experienced decision makers could be less mindful of the incompleteness of TCO information.

Keywords: Complexity, Cost, Costs, Decision, Decisions, Effects, Evaluation, Experience, Information, Managers, Ownership, Processes, Purchasing, Research, Sourcing, Total cost of ownership

Suggested Citation

Morssinkhof, Sebastiaan and Wouters, Marc J.F. and Warlop, Luk, Effects of Providing Total Cost of Ownership Information on Attribute Weights in Purchasing Decisions (2006). KUL Working Paper No. MO 0601. Available at SSRN: https://ssrn.com/abstract=944459 or http://dx.doi.org/10.2139/ssrn.944459

Sebastiaan Morssinkhof (Contact Author)

University of Twente ( email )

Postbus 217
Twente
Netherlands

Marc J.F. Wouters

Karlsruhe Institute of Technology ( email )

Kaiserstra├če 12
Karlsruhe, Baden W├╝rttemberg 76131
Germany

University of Amsterdam Business School ( email )

Roetersstraat 18
Amsterdam, 1018WB
Netherlands

Luk Warlop

KU Leuven - Faculty of Business and Economics (FEB) ( email )

Naamsestraat 69
Leuven, B-3000
Belgium

BI Norwegian Business School ( email )

Nydalsveien 37
Oslo, 0442
Norway

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