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The Value heuristic

Author: Dai, Xianchi INSEAD Area: MarketingPublisher: Fontainebleau : INSEAD, 2009.Language: EnglishDescription: 65 p. : Graphs/Photos ; 30 cm.Type of document: INSEAD ThesisThesis Note: For the degree of Ph.D. in management, INSEAD, June 2009Bibliography/Index: Includes bibliographical referencesAbstract: It is well established that consumers infer value from scarcity, which Cialdini (1984) called the scarcity principle. In this dissertation I demonstrate the reverse of this effect of scarcity on perceived value - consumers infer scarcity of product supply from product attractiveness. I show that this effect arises from the operation of what I call "the value heuristic". In addition, I show that the value heuristic and the scarcity principle interact to bias consumer valuations through a circular inference process, causing a polarization of initial preferences. In other words, consumers infer scarcity of supply from product value, and then, in turn, infer even higher product value from the inferred scarcity. I test these propositions in seven experiments. In the first four experiments, I show the operation of the value heuristic in judgments of portraits, other types of pictures, experiences over time, and consumer products. In the second set of three experiments, I demonstrate that the circular inference process systematically polarizes consumer preferences expressed as consumer satisfaction ratings, product evaluations, and charitable donations (i.e., willingness to pay). Overall, these results provide evidence of a fundamental bias in consumer judgments that has important marketing implications for estimates of supply and for consumer valuations. List(s) this item appears in: Ph.D. Thesis
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For the degree of Ph.D. in management, INSEAD, June 2009

Includes bibliographical references

It is well established that consumers infer value from scarcity, which Cialdini (1984) called the scarcity principle. In this dissertation I demonstrate the reverse of this effect of scarcity on perceived value - consumers infer scarcity of product supply from product attractiveness. I show that this effect arises from the operation of what I call "the value heuristic". In addition, I show that the value heuristic and the scarcity principle interact to bias consumer valuations through a circular inference process, causing a polarization of initial preferences. In other words, consumers infer scarcity of supply from product value, and then, in turn, infer even higher product value from the inferred scarcity. I test these propositions in seven experiments. In the first four experiments, I show the operation of the value heuristic in judgments of portraits, other types of pictures, experiences over time, and consumer products. In the second set of three experiments, I demonstrate that the circular inference process systematically polarizes consumer preferences expressed as consumer satisfaction ratings, product evaluations, and charitable donations (i.e., willingness to pay). Overall, these results provide evidence of a fundamental bias in consumer judgments that has important marketing implications for estimates of supply and for consumer valuations.

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