Midterm - Lecture 3 Flashcards
(22 cards)
post purchase rationalization
- CB where purchasers tend to overlook product faults or overemphasize strengths in order to defend their purchase
- form of endowment effect and outcome of cognitive dissonance
Reasons why cognitive interpretations fall short
1) cognitive biases
2) gaps between cognition and behaviors
Choice supportive bias
Tendency to retroactively impute positive attributes to an option one has already selected
- ex mitroff moon rock study
- stronger when consumers have reputation all capital
Endowment effect
People place a higher value on a good that they already own than on an identical good that they do not own
- selling a motorcycle example
Recency bias
Weigh recent events more heavily than earlier events
Self-serving attributional bias
People attribute personal/internal reasons to positive outcomes and external causes to negative outcomes
Social desirability bias
Inclines individuals to report and demonstrate behavior that is likely to be perceived as “good” by others
Hindsight bias
Inclination to perceive events that have already occurred as being more predictable than they actually were before they took place
Normalcy bias
Difficulty people have in envisioning an unlikely event (natural disaster)
Causes people to underestimate both the possibility of a rare event occurring and its potential effects
Confirmation bias
Establishing true “cause and effect” can only be done from a “disconfirmation” perspective
- can’t prove something to be true, can only disprove something to be untrue
- people do the opposite
Post hoc fallacy
Post hoc ergo propter hoc, Latin for “after this, therefore because of this”
- A occurred, then B occurred
- therefore, A caused B - when B is undesirable, this pattern is reversed
- Avoiding A will prevent B
Denomination effect
People are less eager to spend larger bills than their equal value in smaller bills
Loss aversion (prospect theory)
People’s fear of potential loss is more influential in their thinking than their anticipation of potential gain
Sunk cost fallacy
- often from loss aversion
- when considering whether to spend money on a future purchase, likely to be influenced by having previously invested money on that product or service ➡️ will keep spending money on this that you have already spent money on
- SHOULD NEVER BE CONSIDERED but leads to loss aversion
Irrational escalation of commitment
From sunk costs
- people make decisions that lead to irrational outcomes due to the cumulative effects of rational past decisions in order to justify sunk costs
Forer effect
People believe that they can be “understood” by “scientific tests” and behaviors
- people like being they are more unique and categorizations
- Bertram Forer’s personality tests
Framing and the contrast effect
- Tactic of providing consumers with a point of reference for making a comparison of decision. Makes product look better or less expensive
- Contrast uses a large difference for framing, making it look more desirable
- ex: suggested listing price, sold elsewhere for”
- discounts, place of origin
Set theory and logic
Pg 61 - All A is C - All B is A \_\_\_\_\_\_\_\_\_\_\_ - therefore, all B is C
FALLS APART KF ASSUMPTION IS WRONG
Components to logical thinking
1) proper categorization
2) logical relationships and probabilities
3) correct assumptions
Process of categorization
- mechanism by which humans learn and make decisions, when consumers think of a product, they have to place it in a category of other things
- drastically different products have to spend $ on education due to categorization
Methodological goal of categorization
- maximize the differences between categories (mutually exclusive) ⬆️A B⬇️
- minimize the differences within categories
Optimization 2 goal process ⬆️A B⬆️
Magical thinking and superstition
- seeing patterns where none exist
- erroneously interprets one event or thing as causing another
- confirmation bias and post hoc fallacies tend to reinforce magical thinking
