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Liad Weiss - Oct 16, 2015 (1:30-2:45 PM)

Liad Weiss 

(Marketing - Wisconsin School of Business)

Friday, October 16th, 2015

1:30-2:45 PM

Room 1199 Nancy Nicholas Hall (WI Idea Room)


OPPORTUNITY COST OVERESTIMATION IN CHOICES AMONG OPPORTUNITIES VERSUS ALTERNATIVES

with Ran Kivetz (Columbia)  


Abstract

Consumers commonly make choices about how to utilize their limited resources.  Each choice consumers make creates an opportunity cost, which, normatively, should always be incorporated into decision making.  In contrast to prior research that has shown that opportunity costs tend to be underweighted or even ignored, we propose that in some situations -- when an option is selected from a choice-set of opportunities rather than alternatives -- opportunity costs may actually be overestimated.  Consumers construe options as opportunities when the necessity to tradeoff one option for another arises from extraneous feasibility constraints (e.g., two desirable events co-occur).  Conversely, consumers perceive options as alternatives when the tradeoff is “built-in” (e.g., a marketing incentive provides a choice between two desirable events).  Five studies demonstrate that choice among opportunities induce consumers to imagine ways to utilize all of the choice set’s competing opportunities.  Consequently, consumers feel that by failing to utilize their selected opportunity, they miss-out on all of the opportunities combined (although they could have actually only realized one of the opportunities).  Consistent with this conceptualization, only consumers who desire the imagined outcome of using all of the choice set options demonstrate opportunity cost overestimation.

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KATHRYN CARROLL,
Sep 24, 2015, 8:57 AM
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