On Amir and Dan Ariely
Executive Summary
Since the emergence of neoclassical economics, individual decision making has been viewed largely from an outcome-maximizing perspective. The underlying assumption is that people engage in a cost–benefit analysis over potential outcomes. Building on previous work, the authors suggest that when people make payment decisions, they consider not only their preferences for different alternatives but also guiding principles and behavioral rules. As defined in the current work, rules divide the set of possible actions into two sets: proper and improper. In other words, the decision is guided by what a person believes should or should not be done in a given situation, much like a moral decision is made.
Rules as a decision-making mechanism offer a great benefit because they organize individual and social behavior by following generalized principles. However, this overgeneralized nature may lead to situations in which rules lead to outcomes that are not in the decision maker’s best interest. In this work, the authors identify a specific rule related to intertemporal consumption: Consumers should not pay for delays (even if they are beneficial). The authors describe two characteristics pertaining to the use of rules—rule invocation and rule override—and test them for the case of the aforementioned rule against payment for delayed experiences.
The results show that money can function as the invoking cue for this rule, given that money, as opposed to another form of resource expenditure, leads to behavior that is consistent with the rule but not with preferences. Consequently, the results show that the reliance on this rule can undermine utility maximization. Moreover, the authors find that this rule can be used as a first response to the decision problem but can be overridden if a person is prompted to consider the merits of the specific case at hand. The authors also find that personality difference related to the use of rules may explain heterogeneity in the use of this rule.
The article concludes with a discussion of more general applications of such rules, which may explain some of the seemingly systematic inconsistencies in the ways consumers behave. The authors posit that the use of rules subject to the principles of invocation and override may be far more general than is often believed. Finally, rules are different from other sources of biased decision making in that various manipulations may prevent their invocation or facilitate their override. These important properties provide marketers and policy makers with new avenues through which to influence decision making.
Biography
On Amir received his doctoral degree from the Massachusetts Institute of Technology. He is Assistant Professor of Marketing in the Rady School of Management at the University of California, San Diego. On’s current research focuses on using psychological and economic principles to identify successful strategies in different consumption environments. He also investigates the psychology of using money as the medium of trade and the development and emergence of consumer preferences. For more information about On, see http://rady.ucsd.edu/faculty/directory/amir/.
Dan Ariely received his doctoral degrees from the University of North Carolina at Chapel Hill and from Duke University. He is Luiz Alvarez Renta Professor of Management Science at the Massachusetts Institute of Technology (MIT). Dan’s current research focuses on day-to-day irrationalities and on market mechanisms to try and overcome these. Dan has founded the eRationalty research initiative at the Media Laboratory at MIT and the Center for Advanced Hindsight, also at MIT. In terms of rules for guiding his decisions, Dan attempts to adhere to the strategy of "systematically understanding and modeling information." For more information about Dan, see http://web.mit.edu/ariely/www.
Journal of Marketing Research, Vol. XLIV, No. 1, February 2007
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