Week 9 + Ch 8 Flashcards
(15 cards)
Expectancy value theory
People maximize benefits and minimize costs
(Maximize utility). Thus, compare all the potential outcomes of actions rationally
Prospect theory
- Probability is biased (Perceptive value mismatch)
- Value is biased (Risk seek for losses, risk averse for gains)
- Reference point is important
Mental accounting meaning
People already account costs in their heads before even spending or appoint birthday money to treats mentally
Coding gains and losses (Hedonic editing)
Integrated - Outcomes valued jointly - v(x+y)
Segregated - Outcomes valued seperately - v(x) + v(y)
Hedonic editing principle
Segregate gains to maximize happiness and integrate losses to minimize pain
Silver linings principe
-Lost 10, Found 50 -> INTEGRATE
-Lost 50, Found 10 -> SEGREGATE
Anchoring and adjustment process
Starting with an initial evaluation and adjusting it with additional information
Emotional accounting meaning
The intensity of positive or negative feelings associated with each mental “account” for saving or spending
Self-positivity bias
bad things are more likely to
happen to other people than to themselves
Negativity bias
consumers give negative information more weight than positive information when they are forming judgments
The level effect
people put more emphasis on the left-most digit in a number [$99 is seen as more like $90]
Inept vs Inert set meaning
Inept set - Options that are unacceptable when making a decision
Inert set - Options towards which customers are indifferent
Attraction effect
the addition of an inferior brand
to a consideration set increases the attractiveness of the
dominant brand
Decision framing meaning
The initial reference point/anchor in the decision process
Cognitive VS Affective decision-making model
Cognitive - Consumers combine items of information about attributes to reach a decision
Affective - Decision based on feelings and emotions.
