Complexity and Consistency in Consumer Choice

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Complexity and Consistency in Consumer Choice

Benedict G.C. Dellaert a , Bas Donkers a and Arthur van Soest b a Erasmus School of Economics, Department of Business Economics, Marketing Section,

PO Box 1738, Erasmus University Rotterdam, 3000 DR Rotterdam, The Netherlands a

Faculty of Economics and Business Administration, Department of Econometrics and

Operations Research, PO Box 90153, Tilburg University, 5000 LE Tilburg, The Netherlands

The consistency with which consumers make product choices has important consequences for organizations that wish to anticipate consumers’ preferences when setting their marketing actions. In particular, if consumer choices are not very consistent the impact of changes in marketing mix variables on choice will be lower. This situation may be especially harmful for innovative producers that develop products that are superior to existing alternatives.

If consumers do not respond consistently to a new (superior) product’s strengths in their decisions, the market share of the product will be lower than it could otherwise have been. For consumers it may also be undesirable to make inconsistent choices, especially if this leads them to ignore beneficial product attributes in making their product purchase decisions.

In this study we focus on choice complexity as an important driver of consumer choice consistency. Empirical research on the relationship between effort and choice consistency

(Haaijer, Kamakura, and Wedel 2000), and on the effects of choice set composition on the level

of modeling error in consumer choice models demonstrates that consumer choice consistency may vary with choice complexity (Dellaert, Brazell, and Louviere 1998; DeShazo and Fermo

2002: Swait and Admowicz 2001a). This line of research has emphasized the fact that consumers are more prone to making mistakes in executing weighted added utility rules as choice complexity increases (De Palma, Myers, Papageorgiou 1994).

Consumers may however, also respond to increased choice complexity by resorting to simplifying heuristics that facilitate their decision making (Payne, Bettman and Johnson 1988;

Swait and Adamowicz 2001b). Because heuristics are easier to execute, consumers may be less prone to making errors when they use heuristic decision rules and therefore make more consistent choices. Consumers may on average even make normatively better choices if they execute a simple decision rule consistently, than if they execute a complex decision rule but do so with error (Paquette and Kida 1988). How the two types of impact of complexity on consumer choice (i.e., increased error and increased use of heuristics) combine to affect the consistency of consumers’ choices is not well understood.

Therefore we investigate the relationship between choice complexity, decision simplification and choice consistency. To do so, we distinguish between two aspects of choice complexity: 1. Task complexitity (i.e., the number of cognitive steps a consumer needs to take to choose an optimal product), and 2. Context complexity (i.e., the difficulty of the trade offs that consumers have to make in choosing between products), that have been introduced in the literature as potentially important drivers of choice complexity (Johnson and Payne 1985;

Shugan 1980). We conceptualize their effect on consumer choice consistency as follows. First, increases in task and context complexity may lead consumers to simplify their decision strategy, which may increase the level of consistency in their choices. Second, given a certain decision

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rule, increases in task and context complexity may still affect the level of error in consumers’ choices, and may do so in different ways. We disentangle these effects and study how the two types of choice complexity and the degree of decision rule simplification jointly determine the consistency of the choices made by consumers.

References

Dellaert, Benedict G.C., Jeff D. Brazell and Jordan J. Louviere, (1999), “The Effect of Attribute

Variation on Consumer Choice Consistency,” Marketing Letters 10(2), 139-147.

DePalma, André, Gordon M. Myers and Yorgos, Y. Papageorgiou (1994), “Rational Choice

Under an Imperfect Ability to Choose,” American Economic Review 84(3), 419-440.

DeShazo, J.R. and German Fermo (2002), “Designing Choice Sets for Stated Preference

Methods: The Effects of Complexity on Choice Consistency,” Journal of Environmental

Economics and Management , 44, 123-143.

Johnson, Eric J. and John W. Payne, (1985), “Effort and Accuracy in Choice,”

Management

Science 31(4), 395-414.

Payne, John W., James R. Bettman and Eric J. Johnson (1988), “Adaptive Strategy Selection in

Decision Making,”

Journal of Experimental Psychology: Learning, Memory, and

Cognition 14 (3), 534-552

Paquette Laurence and Thomas Kida (1988), “The Effect of Decision Strategy and Task

Complexity on Decision Performance,” Organizational Behavior and Human Decision

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Shugan, Steven M. (1980), “The Cost of Thinking,”

Journal of Consumer Research 7, 99-111.

Swait, Joffre and Wiktor Adamowicz (2001a), “Choice Environment, Market Complexity, and

Consumer Behavior: A Theoretical and Empirical Approach for Incorporating Decision

Complexity into Models of Consumer Choice,” Organizational Behavior and Human

Decision Processes , 86(2), 141-167.

Swait, Joffre and Wiktor Adamowicz (2001b), “The Influence of Task Complexity on Consumer

Choice: A Latent Class Model of Decision Strategy Switching,” Journal of Consumer

Research , 28(June), 135-148.

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