Another Look at Constructed Preferences and Inherent Preferences

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Another Look at Constructed Preferences and
Inherent Preferences

• Itamar Simonson
• Stanford University

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Preferences are Constructed Based on Context,
Frame, and Elicitation Method

• Preferences are constructed in the process of
  elicitation (Lichtenstein Slovic 2006 also
  Tversky et al. 1988)
• Value Elicitation Is There Anything In There?
  (Fischhoff 1991, American Psychologist)
• Consumer choice is inherently constructive
  (Bettman, Luce, and Payne (1998)
• Preference Construction goes well beyond
  Preferences are influenced

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Outline

• Another example of research about preference
  construction
• A reassessment of preference construction and the
  research methods that generated the evidence for
  construction
• Uncovering Inherent preferences

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Buy-Select or Select-Buy? The Influence of
Dynamic Decision Focus on Consumers Purchase
Likelihood

• Leilei Gao Itamar Simonson

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(No Transcript)
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Decomposing A Purchase Decision
Purchase Decision
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Dynamic Decision Focus

• Choose A, B, C, ? Buy, No Buy
• A Buy-Select Decision Sequence
• Buy, No Buy ? Choose A, B, C, A Select-Buy
  Decision Sequence

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Select-Buy
Buy-Select

Initial Task Choosing
Initial Task Buy/No-buy

Evaluation Focus Relative Option Attractiveness
Evaluation Focus A Choice Sets
Overall Attractiveness
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Proposition

• When the buy/no-buy decision is emphasized
  earlier in a decision process, purchase
  likelihood is more sensitive to a choice sets
  overall attractiveness consumers are more likely
  to make a purchase when the choice set is highly
  desirable in general.

• When the selection decision is emphasized earlier
  in a decision process, purchase likelihood is
  more sensitive to choice options relative
  attractiveness consumers are more likely to make
  a purchase when comparing options in a choice set
  leads to a clear preference resolution.

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Predictions

• Factors that primarily affect a choice sets
  overall attractiveness will have a greater
  influence on consumers purchase likelihood under
  a buy-select decision sequence.
• Factors that primarily affect relative option
  attractiveness will have a greater influence on
  consumers purchase likelihood under a select-buy
  decision sequence.

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Study 3 Donate 1 to A World Endangered Animal

• 2 decision orders select-buy vs. Buy-Selectx 2
  choice set configurations one vs. many good
  options (N98)
• Which animal? ? Donate 1? Vs. Donate 1? ?
  Animal?

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Results Decision Order and Donation Likelihood

• Decision sequence x choice set structure
  interaction
• Wald ?² (1) 6.492, p.01

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Study 4 The Effect of the Number of
Options(Order Favorite flavor? Pack of jelly
beans or 1?)

• Design 2 (decision orders select-buy vs.
  buy-select) x 2 (assortment size 10 vs. 50
  flavors)

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Study 4 Results

• Choice set size X decision order interaction, ?²
  4.09, plt.05

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PREVIOUS EVIDENCE FOR CONSTRUCTION Context
Effects Choose 6 or
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Choose 6 or
Comparisons are addictive
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The Effect of Joint Vs. Separate Evaluationson
Consumer Preferences
Ketchup 24 oz 2.59
Ketchup 24 oz 1.99
and comparable dimensions receive greater weight
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• Phone Jacket Problem Version A
• Imagine that you are about to purchase a jacket
  for 145 and a phone for 35. The phone salesman
  informs you that the phone you wish to buy is on
  sale for 20 at the other branch of the store
  located 15 minute drive away. Would you make a
  trip to the other store?
• --------------------------------------------------
  -----
• Phone Jacket Problem Version B
• Imagine that you are about to purchase a jacket
  for 35 and a phone for 145. The phone salesman
  informs you that the phone you wish to buy is on
  sale for 130 at the other branch of the store
  located 15 minute drive away. Would you make a
  trip to the other store?

Again, salient relative assessments rule
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• TOASTER
• Description Black Decker Cooltouch Two-Slice
  Toaster. Has super wide slots for extra thick
  bread, bagels and English muffins. Exterior stays
  cool to the touch. Removable crumb tray for easy
  cleaning.
• First, please enter the last two digits of your
  social security number (SSN) ______
• 1. Now assume that the last two digits of your
  SSN are a price in dollars. Would you be
  willing to pay this price for this toaster?
  YES NO
• 2. What is the highest price you would be willing
  to pay for this toaster? ______
• Relative assessments gravitate even to not so
  relevant reference points

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Indifference Curves that Travel With the Choice
Set
Ice Cream
Option A Option B Option C Fat
Lowest Middle Highest Taste rating Worst
Middle Best
While you need to know the values of each option
to make a choice, try to guess without the values
if you would Definitely compromise Probably
compromise Probably not compromise Definitely
not compromise
Across 9 categories, compromise share predictions
were compared with actual compromise shares (in
3-option sets with values) Corr. 0.89 A
similar principle observed by Ariely et al.
(2003) Pricing unpleasant sounds ( indif.
curves travel with the anchors)
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So Absolute Values Are Hard to Evaluate

• Context effects
• Task effects
• Anchoring
• Contingent valuations
• (preference reversals are rather easy to show)
• Since people are often absolute value-challenged,
  they gravitate to accessible relative judgments
• Especially in experiments of preference
  construction

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Traffic Accidents About 600 people are killed
each year in Northern California in traffic
accidents. Cal Tran. Investigates various
programs to reduce the number of casualties.
Consider the following two programs, described in
terms of yearly costs (in millions of dollars)
and the number of casualties per year that is
expected following the implementation of each
program. of Casualties Cost Program
X 500 55M Program Y 570 12M -------------
--------------------------------------------------
---------------- Determine the cost of Program X
that makes it equivalent to Y Program
X 500 ? Program Y 570 12M
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(Unreasonable Econ Assumptions aside) How
Relevant and Extrapolable Are Prominent Examples
of Construction?

• E.g., the original (Gamble pricing Vs. Choice)
  preference reversal

P bet 11/12 chance to win 12 chips 1/12
chance to lose 24 chips bet 2/12 chance to
win 79 chips 10/12 chance to lose 5 chips
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Contingent valuation

• How much would you pay to save 2,000 birds from
  drowning in oil ponds?
• Vs.
• How much would you pay to save 2,000,000 birds
  from drowning in oil ponds?

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Have Studies of Constructive Preferences
Overstated the Case for Construction?

• The significance and relevance of preference
  construction demonstrations are often based on
  (sometimes questionable) extrapolations beyond
  the effects actually obtained.
• Do clever manipulations of survey responses take
  advantage of the very context, task, and framing
  effects they were trying to demonstrate?

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So, because absolute values are often not
meaningful, people gravitate to available
relative assessments, which underlies much of the
evidence for preference construction.? Do
Relative Evaluations Completely Determine
Preferences? No, We Often Have Inherent
Preferences
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Regarding Inherent Preferences

• Itamar Simonson
• Stanford University

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Inherent Preference for Licorice Candy(or an
iPhone, a pillow)
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Inherent Preferences

• Inherent preferences stable dispositions to
  dis/like object components (including still
  unfamiliar or nonexisting objects), which are not
  determined by context
• Before they are uncovered, inherent preferences
  are not stored in memory and are not attitudes
  (and may go against current attitudes e.g.,
  ones misinformed belief that he hates sleeping
  with a pillow)

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Inherent Preferences for More Complex Objects
e.g., Discovering the joy of motion-sensitive
videogame remote
Could Inherent Preferences evolve while still
dormant? (e.g. becoming a more active retiree
increases disposition to like a Wii-like game
becoming health conscious)
Discovering pillows
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With Complex Objects IP x Context Interactions

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The Slow Evolution of Inherent Preferences for
Complex Objects
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Or an Inherent Preference for a Profession
(Dentist)
Dennis O'Leary (Equine Dentist)
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Adaptation as an Indicator of Shared Inherent
Preferences ( other things)
But Not
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Adaptation as Indicator of IP (Rozin Schiller
1980)
Bhut Jolokia (hottest pepper)
U.S. subjects tasted a sequence of snacks with
increasing Scoville units. Optimal level was the
one preferred to the previous and follower snack
(also measured the highest tolerated level)
Average Preference of Chili Likers 11
Neutral/Dislikers 7 Average Tolerance of
Chili Likers 13 Neutral/Dislikers 10
Supported explanation Differences in getting to
like the burn (not desensitization)
(despite association with being strong, and food
availability) A number ofmen in the Mexican
village studied freely admit not liking chili
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Inherent Preferences Are More Likely to be
Revealed During (Context-Poor) Experience
Vs.
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Which Objects Are More Susceptible to Influence
of Inherent Preferences?

• Experience-Rich (vs. Experience-Poor) Objects --
  e.g., massage, pillow, intense movie, chair Vs.
  401k, voting, saving 20 on a detergent
• Harder to compare options, nonalignable
  attributes, no chronically accessible reference
  points
• Matters of principle

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Construction Research Has Focused on Comparisons
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So, Do We Have a Masterlist of Preferences?(i.e.,
Was Econ 101 Correct After all?)

• Not exactly
• Inherent preferences are unknown, and most will
  never be tested or uncovered
• We all agree that revealed preferences are often
  (also) shaped by various construction influences

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Beyond Preference Reversals and Construction
Lets Study Inherent Preferences

• What exactly are inherent preferences? (e.g., how
  to represent a disposition to like a licorice
  candy)
• What factors determine why people adapt (i.e.,
  come to like) certain attributes and objects
  (e.g., Wii) but not others (e.g. electronic
  books)?
• How inherent preferences for objects are formed?
• The process of uncovering inherent preferences
• Do inherent preferences affect susceptibility to
  context effects?

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How Might We Study Inherent Preferences?

• Study adoption of objects known (based on early
  adopters) to elicit inherent preferences (e.g.,
  Wii)
• Use longitudinal studies of experience with new
  objects
• Contrast the formation of preferences in
  context-rich and context-poor environments.
• Use more macro approaches (like ergonomics)

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Considering Construction Influences and
Nontransparent Inherent Preferences, What Are
Current Preference Research Methods Good For?
(Not much)

• The essence of construction influences is it
  depends, which makes research findings less
  relevant under many conditions
• The over-reliance on absolute values
• Market research cannot uncover nontransparent
  inherent preferences, except through intensive,
  isolated experience (or Human Factors-like)
  studies