Stimulus Context and the Formation of Consumer Ideals

Abstract

When a choice set consists of a distribution of alternatives with correlated benefits and costs, consumers often exhibit single-peaked preferences—they prefer an alternative having moderate costs and benefits. Theories disagree about how adding additional lower benefit/lower cost or higher benefit/higher cost alternatives to this choice set will affect relative preferences for the initial set of alternatives. Prototype theory predicts that adding alternatives should produce assimilation, whereas multiattribute range-frequency theory predicts that it creates contrast. We reconcile these two theories by assuming that single-peaked preferences reflect a composition of underlying benefit and cost valuations. Moreover, we claim that the correlational structure of the benefit and cost dimensions in the contextual stimuli determines whether these stimuli will exert an assimilation or contrast effect. We show that when benefits and costs are correlated (uncorrelated), adding alternatives that extend the range of offerings produces assimilation (contrast) for preference judgments. We propose a cost-benefit trade-off model that incorporates elements of single-peaked preference theory and range-frequency theory to explain the complex fashion in which contextual stimuli affect consumer ideals.