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Week 4 - Coggle Diagram

- - - - Marketers can strategically introduce decoys to steer consumer preferences towards desired products, enhancing sales
      - Understanding can help consumers become more aware of how their choices are influenced by external factors
      - Highlights importnace of context in DM, suggesting that irrelevant alternatives can sig influence choices
    - - In policy-making, can be utilised to present options in a way that guides public opinion and DM
      - Can also be relevant in negotiations and conflict resolution, where the framing of options can impact outcomes
      - Principles extend beyond consumer behaviour into fields such as healthcare, where treatment options can be framed to influence patient choices
  - - - Algorithms can help in identifyng dominant choices by comparing options based on predefined criteria
      - A coffee shop may use an algorithm to determine which coffee to promote based on sales data and customer preferences
      - Focuses on the process of DM rather than just the attributes of the options
      - Interplay between cues and algorithms can lead to different outcomes in DM
      - Involves using a systematic strategy to evaluate options, akin to how algorithms function in AI
    - - Decoy effect illustrates a violation of this principle, where the presence of a decoy can sway preferences between 2 options
      - Choosing between chicken & beef on a flight can be influenced by an irrelevant option, such as chicken with a coffee spill
      - States that preferences should remain unchanged when irrelevant options are introduced into a DM scenario
      - Research shows that introducing a decoy can alter perceived value and preferences,
      - Crucial in understanding consumer behaviour and marketing strategies
    - - DM often rely on cues to simplify complex choices, making them feel more confident in their decisions
      - Can lead to a preference for options that are not necessarily the best overall but appear better due to enhanced attributes
      - Cues are attributes that influence choices; they can enhance attractivenes of an option based on certain criteria
      - A product may be markested as the best value based on a specific cue, even if other options are objectively superior
      - Refers to how the evaluation of specific attributes can change perceived value of options in DM
  - - - Target can appear better on its strongest attributes when compared to the decoy, enhacning attractiveness
      - Decoy can also prevent the target from being perceived as the worst option on any attribute, improving overall evaluation
      - Suggests that the decoy alters perceived value of the target by changing how it is evaluated against alternatives
    - - For the decoy to be effective, it must be worse than target at least one attribute while better than competitor on same attribute
      - Creates justification for choosing target over competitor, as the target is perceived as the better option
      - Decoy often referred to as the asymmetric dominance effect, where the decoy is designed to be dominated by target not competitior
  - - - Highlights psych impact of ownership on perceived value, even when ownership is brief
      - In a study, ppts who were given a mug valued it higher than those who were only offered to buy it
      - Demonstrated through experiments involving common items, such as mugs, where ppts show a willingness to sell their owned item at a higher price than they would pay to acquire it
      - Significant in understanding consumer behaviour and market dynamics
      - Phenomenon where individuals assign higher value to items the own compared to items they do not own
    - - Designed to eliminate hypothetical biases, ensuring that ppts express true valuations based on real stakes
      - Can be observed even when ownership is momentary, indicating powerful influence on DM
      - Ppts who own an item often set higher selling prices compared to buying prices set by non-owners
      - Can inform pricing strategies and consumer engagement tactics
      - Experiments typically involve real trading scenarios where ppts either receive an item or are asked to purhcase it, ensuring genuine valuation
  - - - Has been observed across different domains, including consumer products and medical choices
      - In medical contexts, the decoy can influence choices with varying effectiveness and side effects, making target more favourable
      - Decoy can manipulate perceptions of quality and price, leading to a 20% increase in selection of target in various studies
    - - Schwartz & Chapman conducted studies demonstrating decoy effect in medical DM, where patients had to choose between treatments with different side-effects
      - In consumer behaviour, the introduction of decoy beer option increased likelihood of consumers choosing target beer over competitor
    - - The target is the preferred option that marketers aim to promote, the competitor is the less desirable option that consumers discouraged from choosing
      - Decoy is designed to be less attractive than the target but more expensive, thereby making the target appear more appealing
      - Occurs when the presence of an irrelevant option influences the choice between two other options
  - - - Ppts are bound by the system to purchase at the stated price, ensuring genuine trading behaviour
      - Emphasises real trading scenarios, allowing for authentic buyer-selling interactions
      - Structured to encourage ppts to reveal their true valuation of items, minimising inflated pricing
    - - Concept of loss aversion suggests that losing an item is perceived as more painful than pleasure of gaining it
      - Sellers often require higher prices to part with an item due to the emotional attachment formed through ownership
      - Ownership influences how individuals perceive the value of an item, with sellers focusing on potential losses & buyers on potential gains
  - - - Reference dependence plays a crucial role in how individuals perceive value and make choices based on available options
      - Concept of nudging is relevant, where subtle changes in the presentation of choices can lead to different outcomes without restricting options
      - Framing of choices, such as loss vs gain scenarios, sig impacts how decisions are made
      - Understanding can improve DM strategies in various fields, like economics, psychology and marketing
      - DM is influenced by cognitive biases and heuristrics, which can lead to systematic errors in judgement
    - - Implications of nudging for profit highlight the need for ethical guidelines in marketing practices
      - Consumers should be aware of these tactics to make more informed choices and resist manipulation
      - Marketers must balance profit motives with ethical considerations regarding consumer welfare and transparency
      - Ongoing discussions in behav economics focus on the responsibility of businesses to promote fair & ethical DM practices
      - The use of decoy effect raises ethical questions about consumer manipulation and informed DM
  - - - Losses are perceived to loom larger than gains, which affects pricing strategies in trading scenarios
      - Value function in PT illustrates utility derived from gains is less than the disutility from equivalent losses
      - PT posits that individuals evaluate potential losses and gains differently, leading to irrational DM
    - - Emotional connection to owned items may lead to a reluctance to relinquish them, independent of loss aversion
      - Original studies did not adequately separate effects of ownership from buyer-seller dynamic
      - Moorreg et al challenges the traditional loss aversion explantion, suggesting that ownership itself adds intrinsic value to items
  - - - Research on beer pricing demonstrated this, where a less appealing option increased attractiveness of a target product
      - Not limited to consumer goods; also applies to services and experiences, affecting how choices are framed and perceived
      - Apple products often utilise this by presenting a high-priced option alongiside slightly lower-priced alternatives
      - Understanding is essential for both consumers and marketers to navigate and influence DM
      - Economist subscription example illustrates how a decoy can shift consumer preferences, leading to more sales of expensive option
    - - If a consumer is presented with 3 options - A, B and a decoy C that is less appealing - option A may seem more favourable due to the presence of C
      - Demonstrates how irrelevant info can impact rational decision-making processes
      - Can change perceived value of the primary options, leading to a preference shift
      - Widely studied in behavioural economics and marketing, revealing insights into consumer psychology
      - Options that are intentionally designed to influence DM by making other options appear more attracive
    - - Designed to be unattractive, yet its presence alters perceptions of value among the remaining options
      - Demonstrates that consumers are not always rational and can be swayed by irrelevant info in DM
      - Subscription options for a magazine, where a decoy print only option led to increased selection of a more expensive option
      - Widely used in marketing strategies to guide consumer choices towards higher-profit options
      - Occurs when introduction of an inferior option influences consumer choice, making another option appear more attractive
    - - Both mechanisms highlight complexity of human choices and the factors that influence them
      - Understanding can help marketers design better strategies to influence consumer behaviour
      - The Q effect emphasises the enhancement of specific attributes, while algorithmic strategies focus on the DM process
      - The decoy effect is not just a marketing tool; it reflects deeper cognitive biases in human DM
      - The Q effect & algorithmic strategies both contribute to the decoy effect, providing different explanations for why it occurs
  - - - Owner buyers were WTP more for a second mug compared to non-owner buyers
      - Ownership creates a psych attachement that affects perceived value, rather than just gain-loss framework
      - Involves 4 conditions to assess the impact of ownership on pricing; owner sllers vs non-owner buyers & owner buyers vs non-owner buyers
    - - Showed minimal differences between owner & non-owner sellers, reinforcing idea that ownership impacts value perception
      - Further supports notion that direct ownership experience is a sig factor in how value is assessed
      - Ppts acting as brokers for friends, allowing for both buying and selling scenarios
  - - - Understanding decision making involves transitioning from specific scenarios to broader behavioural patterns & influences
      - Key factors in DM include the design of info, social environment and physical environment
      - Study of decision making encompasses both broad theories and specific experiements that illustrate how choices are made
      - A complex process influenced by various factors, including context, risk and uncertainty
    - - Decisions can be categorised into risk-based and riskless decisions, where riskless decisions involve known outcomes & probabilities
      - Risk-based decisions involve uncertainty and potential for various outcomes, often analysed through prospect theory
      - Riskless decisions allow for a clearer understanding of how context and external factors influence choices
      - Importance of context in DM is highlighted through various examples and experiments
      - Understanding distinction between risk and riskless decisions is crucial for analysing consumer behaviour
  - - - Suggest that cognitive processes such as memory and attention play crucial roles in how individuals assess value
      - Query theory posits that order and type of cues that come to mind during eval sig influence DM
      - New cog mechanism accounts focus on mental processes involved in evaluating value, moving beyond prospect theory
    - - A mug's design might be appealing, or it could serve as a thoughtful gift, impacting how much on is WTP
      - Understanding can help in predicting consumer behaviour and pricing strategies in trading contexts
      - Cues influencing value perception may include design aesthetics, potential utility & personal significance of the item
  - - - Sellers focus on positive attributes of the item before considering reasons to sell
      - Differnces cna sig influence market behaviour and pricing strategies
      - Buyers typically eval items considering negative aspects, leading to lower valuations
    - - Results indicated that when ppts prompted to consider neg first, the endowment effect diminished
      - Supports theory that cog processes and info processing styles differ between buyers ans sellers
      - Researchers conducted experiments of observe endowment effects by altering order ppts consider pos and neg attributes
    - - Can lead to irrational DM, as owners may overvalue their possessions, impacting willingness to trade or sell
      - Often illustrated through simple examples, where owners focus on pos attributes while potential buyers consider negatives
      - Endowment effect refers to when individuals assign more value to items they own compared to items they do not own
  - - - Sellers tend to continue sampling options until they encountered a high outcome, while buyers stopped after seeing a low outcome
      - Suggests that sellers are more thorough in their search for info, potentially leading to better DM outcomes
      - Info search account posits that buyers and sellers approach info gathering differently based on their transaction role
    - - Sellers may exhibit a more comprehensive undertanding of value due to their experience, while buyers may make quicker less informed decisions
      - Distinction highlights importance of context and experience in economic transactions and DM processes
      - Imply that emotional attachements and personal sentiments can influence how individuals process info about objects
  - - - Dealers treated cards as commodities rather than possessions, leading to more rational trading behaviour
      - Suggests that familiarity with a market can mitigate emotional biases assoc with ownership
      - Study involving sports card dealers demonstrated that experienced traders are less susceptible to the endowment effect
    - - Endowment effect and info search behaviours have implications for various fields
      - Understanding can help businesses tailor their strategies to account for consumer bias and improve DM
      - Future resaerhc may explore how diff contexts and experiences further influence valuation and DM processes