Why does context matter? Attraction effects and binary comparisons

Wolfgang R. K�hler

No 330, IEW - Working Papers from Institute for Empirical Research in Economics - University of Zurich

Abstract: A large experimental and empirical literature on asymmetric dominance and attraction effects shows that the probability that an alternative is chosen can increase if additional alternatives become available. Hence context matters and choices and, therefore, market shares can not be accurately described by standard choice models where individuals choose the alternative that yields the highest utility. This paper analyzes a simple procedural choice model. Individuals determine their choice by a sequence of binary comparisons. The model offers an intuitive explanation for violations of regularity such as the attraction and the asymmetric dominance effect and shows their relation to the similarity effect. The model analyzes a new rationale why context matters. The model is applied to explain primacy and recency effects and to derive implications with respect to product design.

Keywords: Asymmetric dominance; attraction effect; similarity effect; binary choice; primacy effect; recency effect; regularity (search for similar items in EconPapers)
JEL-codes: D11 M31 (search for similar items in EconPapers)
Date: 2007-07
New Economics Papers: this item is included in nep-dcm and nep-upt
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Citations: View citations in EconPapers (1)

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