Consumer Bias Research Articles

Unlocking the Subconscious Consumer Bias: A Survey on the Past, Present, and Future of Hybrid EEG Schemes in Neuromarketing.

Fueled by early success stories, the neuromarketing domain advanced rapidly during the last 10 years. As exciting new techniques were being adapted from medical research to the commercial domain, many neuroscientists and marketing practitioners have taken the chance to exploit them so as to uncover the answers of the most important marketing questions. Among the available neuroimaging technologies, electroencephalography (EEG) stands out as the less invasive and most affordable method. While not equally precise as other neuroimaging technologies in terms of spatial resolution, it can capture brain activity almost at the speed of cognition. Hence, EEG constitutes a favorable candidate for recording and subsequently decoding the consumers' brain activity. However, despite its wide use in neuromarketing, it cannot provide the complete picture alone. In order to overcome the limitations imposed by a single monitoring method, researchers focus on more holistic approaches. The exploitation of hybrid EEG schemes (e.g., combining EEG with eye-tracking, electrodermal activity, heart rate, and/or other) is ever growing and will hopefully allow neuromarketing to uncover consumers' behavior. Our survey revolves around last-decade hybrid neuromarketing schemes that involve EEG as the dominant modality. Beyond covering the relevant literature and state-of-the-art findings, we also provide future directions on the field, present the limitations that accompany each of the commonly employed monitoring methods and briefly discuss the omni-present ethical scepticizm related to neuromarketing.

Competition Law and Digital Ecosystems: Learning To Walk Before We Run

Competition authorities are under severe political pressure to intervene quickly against the digital behemoth for a variety of reasons. Various expert reports have suggested that traditional antitrust or competition law enforcement and merger control are inadequate or insufficient to deal with competition issues in the digital sector. In this paper we review a number of issues for which further economic thinking is required before competition authorities can make informed and relevant decisions about competition on digital markets. We review the difference between competition between firms and competition between digital multi-products ecosystems, data and privacy issues, the relationship between competition within ecosystems and competition between ecosystems, the implications of consumer biases on competition in the digital sector, the competition issues raised by gatekeepers, and the trade-offs involved in interoperability and data portability. We also discuss merger control. We conclude with a research agenda to help competition authorities avoid the risks of inadvertently giving in to the political pressure of economic populism or ideology or issuing misguided decisions which may be ineffective or, even worse, restrict competition or innovation in the digital sector

An examination of consumer bias against female and minority commercial pilots

Several studies have examined biases towards gender and ethnic minorities in professional settings, such as medical practices, academia, and aviation. Our research aims to understand consumers' attitudes towards ethnic minorities and female pilots. A better understanding of the impact of customers' perceptions on these minority groups could improve commercial flight operations and support increasing air travel demands. Specifically, this study investigated consumer perceptions of gender and ethnic bias towards commercial airline pilots and flight students in the United States. In a two-experiment design, participants in Study 1 viewed pictures of current female and male commercial pilots of various races. Participants then rated their opinions on the quality of the pilot (e.g. professionalism, flight safety, smoothness of flight, and their confidence in the pilot). In Study 2, participants viewed pictures of student pilots and rated the individual's likeliness to succeed in flight training. The results indicated that participants favored White male pilots in all conditions and that female and ethnic pilots were generally viewed as less favorable. These findings suggest that overt biases are present towards pilots with implications demonstrating that biases influence the hiring processes for female and minority pilots.

Using numbers in CSR communication and their effects on motive attributions

PurposeThis study aims to investigate how judgments of firms’ underlying motives are affected by corporate social responsibility (CSR) communication which features percentages of profit allocations to CSR causes. It also examines how firm size interacts with CSR spending allocations affecting motive attributions for firms of different sizes.Design/methodology/approachTwo experiments were carried out manipulating CSR spending allocations (smaller vs larger percentage of profit) and firm size (small vs large firm).FindingsA larger percentage of profits allocated to CSR enhanced value-driven motives and inhibited inferences of manipulative intent, which produced lower egoistic-driven motives. Large firms allocating smaller percentages to CSR were judged as less value-driven and were more prone to elicit manipulative intent.Originality/valueTwo routes of motive attributions were identified – a direct route, contingent on CSR spending allocations and firm size; and an indirect route via inferences of manipulative intent, which inhibited favorable motives and prompted unfavorable ones. Both routes resulted from numerical cognition associated with the processing of numbers. Managerial implications include suggestions for firms wishing to overcome negative consumer bias arising from communication featuring CSR spending allocations and firm size.

Life Insurance and Life Settlement Markets with Overconfident Policyholders

We analyze how the life settlement market – the secondary market for life insurance – may affect consumer welfare in a dynamic equilibrium model of life insurance with one-sided commitment and overconfident policyholders. As in Daily et al. (2008) and Fang and Kung (2010), policyholders may lapse their life insurance policies when they lose their bequest motives; but in our model the policyholders may underestimate their probability of losing their bequest motive, or be overconfident about their future mortality risks. For the case of overconfidence with respect to bequest motives, we show that in the absence of life settlement overconfident consumers may buy “too much” reclassification risk insurance for later periods in the competitive equilibrium. In contrast, when consumers are overconfident about their future mortality rates in the sense that they put too high a subjective probability on the low-mortality state, the competitive equilibrium contract in the absence of life settlement exploits the consumer bias by offering them very high face amounts only in the low-mortality state. In both cases, life settlement market can impose a discipline on the extent to which overconfident consumers can be exploited by the primary insurers. We show that life settlement may increase the equilibrium consumer welfare of overconfident consumers when they are sufficiently vulnerable in the sense that they have a sufficiently large intertemporal elasticity of substitution of consumption.

Price Dynamics of Swedish Pharmaceuticals

This paper investigates price patterns of off-patent pharmaceuticals in Sweden. I show that price dynamics are dependent on the number of competitors in the market. The price patterns follow predictions from a model of dynamic price competition in which the demand for pharmaceuticals incorporates the known biases of consumers: habit persistence and brand preferences. Using the regulated market of Swedish pharmaceuticals, I show that price dynamics may help in identifying possible tacit collusion by manufacturers in markets where consumers experience behavioral frictions.

Assessing Monopoly Power or Dominance in Platform Markets

The proper assessment of monopoly power or dominance in platform markets is a hot topic of debate and study, including by competition agencies around the world and the multilateral organizations in which they participate. For example, the International Competition Network is currently gathering feedback from agencies and non-governmental advisors in response to its questionnaire on the topic. This note draws on the existing economics literature to provide responses to some of the key questions being studied. Topics include: whether to define one integrated market or two separate-product markets; the use of market shares as a proxy for monopoly power; potential barriers to entry such as network effects, data, user switching costs, and consumer biases (e.g., consumer inertia or default settings); and the role of multihoming.

Cognitive Biases of Consumers’ Risk Perception of Foodborne Diseases in China: Examining Anchoring Effect

Consumer cognitive biases arise from judgment and decision-making due to their limitations in information processing. As one of the important cognitive biases, the anchoring effect plays a significant role in interfering with consumers’ risk perception. With a stratified random approach, we collected survey data from 375 consumers in Wuxi, Jiangsu Province, China. Based on these data, this study attempted to analyze the anchoring effect in consumers’ risk perception of foodborne diseases (FBDs) and the differences in their perception before and after intervention in a contrast experiment using the anchoring index and the Wilcoxon signed-rank test. The results confirm the existence of the proposed anchoring effect. Moreover, the experimenter-provided anchor value, a history of FBD, and familiarity with FBD were found to be important factors influencing this anchoring effect. Therefore, improving consumers’ risk perception of FBD is critical to the long-term prevention of FBD risks by the government and consumers. The government should strengthen active monitoring, publicity, and education about FBD.

Microbial Spoilage and Preservation of Wine: Using Weapons from Nature's Own Arsenal -A Review

The winemaking process includes multiple stages at which microbial spoilage can occur, altering the quality and hygienic status of the wine and rendering it unacceptable. The major spoilage organisms include species and strains of the yeast genera Brettanomyces, Candida, Hanseniaspora, Pichia, Zygosaccharomyces etc., the lactic acid bacterial genera Lactobacillus, Leuconostoc, Pediococcus, etc. and the acetic acid bacterial genera Acetobacter and Gluconobacter. The faults caused include bitterness and off.flavours (mousiness, ester taint, phenolic, vinegary, buttery, geranium tone), and cosmetic problems such as turbidity, viscosity, sediment and film formation. These spoilage organisms can also affect the wholesomeness of wine by producing biogenic amines and precursors of ethyl carbamate. The judicious use of chemical preservatives such as sulphur dioxide (S02) during the winemaking process decreases the risk of microbial spoilage, but strains vary considerably in their S02 sensitivity. There is, moreover, mounting consumer bias against chemical preservatives, and this review focuses on the possible use of biopreservatives in complying with the consumers' demand for clean and green products.

The role of facial attractiveness in tennis TV-viewership

Social sciences, anthropology, psychology, and economics researchers have shown various effects of physical attractiveness. In this study, the authors analyze 622 live tennis matches from 66 Grand Slam tournaments between 2000 and 2016, examining the relationship between facial attractiveness, measured by tennis players’ facial symmetry, and TV-viewership. Results indicate that facial symmetry plays a positive role for female matches while there is no significant effect for male matches. The effect persists in several subsample regressions and robustness checks. The findings have important implications for managers in the field of sports. While public broadcasters have a public service function and therefore should be careful in exploiting consumer biases to avoid reinforcing non-sports taste-based discrimination types. Commercial broadcasters and media institutions with solely profit-maximizing objectives will likely exploit consumer biases.

Cognitive biases of consumers as barriers in transition towards circular economy

PurposeThe purpose of this paper is to identify the cognitive biases of consumer and explain how they are creating barriers in transition towards circular economy (CE).Design/methodology/approachThis is a conceptual paper which adopts a consumer-centric conceptualization of CE by focussing on cognitive biases as an underlying and unifying mechanism which is creating barriers in the adoption of CE. This conceptualization explains consumers’ non-adoption of circular business model, highlight synergies across disconnected theories and streams of research originating in different disciplines and at the individual, societal and cultural levels of analysis.FindingsThe findings of this paper suggest that circular business models are not fulfilling the psychological, social and cultural needs of the consumers and that in turn lead to barriers in diffusion of the CE. Consumers have a negative connotation with the different circular business model due to their cognitive biases.Practical implicationsThe paper details about key implications to design effective interventions to modify consumer behaviour in the desired direction for hassle-free transition to CE from the linear economy.Originality/valueThis paper offers a shift in CE research from a deterministic approach to conceptualising consumers to a positivist approach to conceptualising consumers.

Explaining Bundle-Framing Effects with Signaling Theory

Many sellers bundle add-ons (e.g., in-flight entertainment, hotel amenities) with core services (e.g., transportation, lodging). One surprising empirical finding is that consumers often believe bundle frames provide greater value than equivalent unbundle frames ($10 > $9 + $1) despite equal all-inclusive prices. Although these context or framing effects appear irrational in isolation, the bundle-framing effect might reflect market relationships caused by underlying seller motives. We show that bundling can signal information about product appeal, that is, popularity. Specifically, only sellers of wide-appeal (popular) add-ons (e.g., well-liked entertainment, sought-after hotel amenities, standard side salads, popular excursions) have an incentive to bundle their add-ons with their core products (e.g., flights, hotel rooms, restaurant entrées, cruise trips). By contrast, sellers of narrow-appeal (niche) add-ons (e.g., unorthodox entertainment, unpopular amenities, exotic side salads, unusual excursions) find that bundling is undesirable because they lose core revenue. Consequently, bundling can convey information about horizontally differentiated markets even when the total all-inclusive price equals that of unbundling. Perhaps some presumed consumer biases can reveal market relationships. Frames provide information about the framer. The online appendix is available at https://doi.org/10.1287/mksc.2018.1097 .

Phishing holidays

A recent book by Nobel laureates Akerlof and Shiller, Phishing for Phools, has drawn attention to the ‘dark side’ of the nudge. This article presents the timeshare market as an exemplar; a number of features of this market make it uniquely suitable for this purpose. I highlight the manner in which developers leverage consumer biases and cognitive limitations to secure sales. I then draw comparisons with the timeshare resale market to estimate the loss to consumers. I finish with some possible recommendations for reform.

SEKTÖREL DÜZENLEMELER VE DAVRANIŞSAL İKTİSAT: 149 SAYILI KARARIN DÜŞÜNDÜRDÜKLERİ

This paper emphasizes that designing sector specific regulations, based on the rational individual assumption, may not establish a competitive environment and it has a potential to create social opportunity cost. Based on the behavioral economics literature, the paper provides a systematic critique on the regulation of ICTA in respect of the Decision numbered 149, which entered into force in 2009 and was abolished in 2016. The primary conclusion of the paper suggests that the regulation does not reflect the real purchasing behavior of the consumers. The second conclusion indicates that while designing the regulation, possible exploitative behavior of the regulated undertaking, through using the biases of consumers, are ignored.

SEKTÖREL DÜZENLEMELER VE DAVRANIŞSAL İKTİSAT: 149 SAYILI KARARIN DÜŞÜNDÜRDÜKLERİ

Bu çalışma, tüketicilerin rasyonel davrandığı varsayımıyla tasarlanan sektörel düzenlemelerin, kendisinden beklenen rekabetçi yapıyı sağlama fonksiyonunu yerine getirmeyebileceğini ve toplum için fırsat maliyetleri yaratabileceğini vurgulamaktadır. Çalışma bu vurguyu, BTK’nın 2009 yılında yürürlüğe girip 2016 yılında yürürlüğü sonlanan ve kamuoyunda “149 sayılı Karar” olarak bilinen düzenlemesi üzerinden, davranışsal iktisat literatürüne dayalı sistematik eleştiriler sunarak yapmaktadır. Çalışmanın vardığı sonuçlardan ilki, söz konusu düzenlemenin tüketicilerin satın alma davranışlarını yansıtmadığına işaret etmektedir. İkincisi ise, düzenlemeye tabi olan işletmecinin, tüketicilerin yanlılıklarını kullanarak, düzenlemeyi kendi lehine çevirebileceğinin gözden kaçırıldığını göstermektedir.

Down by Algorithms? Siphoning Rents, Exploiting Biases and Shaping Preferences The Dark Side of Personalized Transactions

In this article we seek to systematically explore and understand crucial aspects of a potential dark side of personalized transactions. Big data and artificial intelligence may enable businesses with access to the data and the required technology to effectively personalize their interactions with consumers in order to exploit informational asymmetries and/or consumer biases in novel ways and on an unprecedented scale. We identify three aspects of the dark side of personalized B2C transactions as particular areas of concern. First, businesses increasingly engage in first-degree price discrimination, siphoning rents from consumers. Second, firms exploit well-known behavioral biases of consumers such as, for example, their inability to correctly assess the long-term effects of complex transactions or their insufficient will-power, in a systematic fashion. And third, businesses use microtargeted ads and recommendations to shape consumers’ preferences and steer them into a particular consumption pattern, effectively locking them into a lifestyle determined by their past choices and those of likeminded fellows. At first sight, siphoning rents, exploiting biases and shaping preferences appear to be relatively distinct phenomena. However, on closer inspection, these phenomena share a common underlying theme: the potential exploitation of consumers or at least an impoverishment of their lives by firms who apply novel and sophisticated technological means to maximize profits. Hence, the dark side of personalized B2C transactions may be characterized as consumers being “brought down by algorithms”, losing transaction surplus, engaging in welfare-reducing transactions and increasingly being trapped in a narrower life. It is unclear whether first-degree price discrimination creates an efficiency problem, but surely it raises concerns of distributive justice. We propose that it should be addressed by a clear and simple warning to the consumer that she is being offered a personalized price and, in addition, a right to indicate that she does not want to participate in a personalized pricing scheme. Similarly, behavioral biases may or may not lead consumers to conclude inefficient transactions. But it appears that they should be given an opportunity to reflect on their choices if these have been induced by firms applying exploitative algorithmic sales techniques. Hence, we propose that consumers should have a right to withdraw from a contract concluded under such conditions. Indeed, in many jurisdictions they already have such a right today. Finally, shaping consumers’ preferences by microtargeted ads and recommendations prevents consumers from experimenting and leading a multifaceted life. We should have a right to opt out of the technological steering mechanisms created and utilized by firms that impoverish our lives.

COEXISTENCE OF PRIVATE FIRMS AND OPEN SOURCE FIRMS UNDER SPILLOVERS AND CONSUMER BIAS

Open source technologies have been an important divergence from the private produc- tion, and some markets have accommodated both open source firms and private firms. We explore the conditions under which such a coexistence of both type of firms can be seen. Through a simple and tractable game theoretical model, with spillovers on the open source production and positive consumer bias for the privately produced good, we analyze the conditions for which, in the equilibrium, a private firm and an open source firm share the market. We find that for large enough consumer bias, the two types cannot coexist, however when the consumer bias is relatively low and the spillover effect is not too strong, then we get a coexistence result.

Behavioral considerations for effective time-varying electricity prices

AbstractWholesale prices for electricity vary significantly due to high fluctuations and low elasticity of short-run demand. End-use customers have typically paid flat retail rates for their electricity consumption, and time-varying prices (TVPs) have been proposed to help reduce peak consumption and lower the overall cost of servicing demand. Unfortunately, the general practice is an opt-in system: a default rule in favor of TVPs would be far better. A behaviorally informed analysis also shows that when transaction costs and decision biases are taken into account, the most cost-reflective policies are not necessarily the most efficient. On reasonable assumptions, real-time prices can result in less peak conservation of manually controlled devices than time-of-use or critical-peak prices. For that reason, the trade-offs between engaging automated and manually controlled loads must be carefully considered in time-varying rate design. The rate type and accompanying program details should be designed with the behavioral biases of consumers in mind, while minimizing price distortions for automated devices.

Paying for Mirrors or Windows? Consumer Discrimination and Hollywood Films

Is employment discrimination driven by consumer bias rather than employer bias? One explanation for the persistence of employment discrimination, despite considerable legal and social pressure, is ...

Perceived Positioning of ‘Made in China'

Marketing a product to global consumers is a challenge due to intense competition and consumer biases toward specific country in global market. This paper has been used to address the specific challenge of country made in label in context of ‘Made in China' because China is largest manufacturer and exporter in the world. A conceptual framework has been drawn using extant literature to determine the perceived positioning of ‘Made in China' label. For conceptualization of this study means-end theory has been used which determine product characteristics at superior level. The proposed conceptual framework provides strong managerial insights and indicates that positioning of ‘Made in China' label is significantly influenced at cognitive, normative and affective level. Authors believe this framework as a valuable guideline for brands those are thinking to approach global consumers. This study is also comprised of the mechanism that can be used by firms to handle the perceived positioning of ‘Made in China'.