Exam 11: Behavioral Decision Theory

Loss aversion implies that marketers should aggregate and segregate .

According to the framing effect, when people think of decisions in terms of positive outcomes, they are risk averse.

In both singular evaluation and comparative evaluation, attributes that are familiar and easy to evaluate (versus unfamiliar and difficult to evaluate) have a greater impact on preference.

For consumers, many small gains are not as pleasant as one large gain, which means marketers should aggregate consumer gams.

In the framing effect, preferences are said to have "reference dependence."

In both the endowment effect and sunk cost effect consumer tend to overestimate opportunity costs.

Choice deferral refers to a reluctance to make a decision for some reason.

Consider the following example: Consumers are asked to evaluate two digital camera cards: Capacity Distortion Factor Camera A: can hold 350 pictures .002 Camera B: can hold 400 pictures .I Camera C: can hold 450 pictures .2 Distortion factor was defmed for consumers since most consumers are unfamiliar with this attribute.(Consumers were told that distortion factor lowers the picture quality, and a lower number is better). Under singular evaluation, consumers should prefer which brand?

Due to the sunk cost effect, people are often reluctant to walk away from buying something after they have invested lots of time and effort in searching for and evaluating the product.

Which of the following factors does not potentially cause preference reversal:

Loss aversion implies that losses have a bigger impact on people, relative to equivalent gains.

Selective thinking is more likely to occur in singular (vs.comparative) evaluation.

What is a preference reversal and what causes a preference reversal?

When questions are framed negatively, people tend to respond differently than when problems are framed positively. Explain this.

According to expected utility theory, people should think about uncertain events in terms of:

The is the tendency to not give up a product or service because a significant amount of time, money, or effort has already been invested in it.

Expected utility theory suggests that all alternatives can be rank ordered from worst to best and that alternatives with the highest expected values should be preferred.

Lois is consideriog buyiog a new bicycle for $200.It has a 20% chance of breaking down in the next year.What is the expected value in terms of repair cost for this purchase?

The shows that consumers form unrealistically favorable evaluations of moderately favorable brands when they form singular evaluations, but not when they form comparative evaluations.

Research shows that American consumers are typically more overconfident in their decision making than Asian consumers.