Journal of Marketing Behavior > Vol 2 > Issue 4

Convexity Neglect in Consumer Decision Making

Michael Tsiros, University of Miami, USA, tsiros@miami.edu Haipeng (Allan) Chen, Texas A & M University, USA, hchen@mays.tamu.edu
 
Suggested Citation
Michael Tsiros and Haipeng (Allan) Chen (2017), "Convexity Neglect in Consumer Decision Making", Journal of Marketing Behavior: Vol. 2: No. 4, pp 253-290. http://dx.doi.org/10.1561/107.00000037

Published: 13 Apr 2017
© 2017 M. Tsiros and H. (A.) Chen
 
Subjects
 
Keywords
ConvexityNumeracyAveragingRatioHarmonic meanArithmetic mean
 

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In this article:
Study 1: Convexity Neglect Leads to Judgments of Better Options as Worse
Convexity Neglect in Financial Decision Making
Study 2: Stock Preferences in the Presence of Convexity Neglect
Study 3: Underlying Processes for Convexity Neglect
Summary and Conclusions
Appendix A. Stimuli and Measures in Study 1a
Appendix B. Stimuli and Measures, Study 1b
Appendix C. Stimuli and Measures, Study 2
Appendix D. Study 3 Pretest Stimuli, Measures, and Detailed Results
References

Abstract

Purchase decisions occasionally involve ratio calculations (e.g., calories per serving). When faced with decisions that involve information presented in such formats, consumers often ignore the convexity inherent in these calculations and rely on the more intuitive arithmetic mean rather than the correct harmonic mean in averaging ratios. In three studies, we show that convexity neglect systematically affects consumers' judgment and leads to suboptimal choices. In addition, we provide evidence that convexity neglect is a result of individuals' use of a wrong mental model substituting the arithmetic mean for the harmonic mean, rather than their lack of computational skills or motivation, to conduct the necessary calculations.

DOI:10.1561/107.00000037