Research Note--Should Consumers Use the Halo to Form Product Evaluations?

Peter Boatwright (), Ajay Kalra () and Wei Zhang ()
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Peter Boatwright: Tepper School of Business, Carnegie Mellon University, Pittsburgh, Pennsylvania 15213
Ajay Kalra: Tepper School of Business, Carnegie Mellon University, Pittsburgh, Pennsylvania 15213
Wei Zhang: Altus Pharmaceuticals, Cambridge, Massachusetts 02139

Management Science, 2008, vol. 54, issue 1, 217-223

Abstract: In purchase situations where attribute information is either missing or difficult to judge, a well-known heuristic that consumers use to form evaluations is the halo effect. The psychology literature has widely considered the halo a reflection of consumers' inability to discriminate between different attributes and have therefore labeled it the "halo error" or the "logical error." The objective of this paper is to offer a rationale for the halo effect. We use a decision-theory framework to show that the halo is consistent with the goal of minimizing estimation risk. Contrary to conventional wisdom, we demonstrate that a decision using the halo has lower estimation risk compared to not using the halo heuristic. Therefore, using the halo results in utility maximization and is indicative of rational behavior.

Keywords: halo effect; decision-theoretic consumer choice; James-Stein estimator; utility preference (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (18)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:54:y:2008:i:1:p:217-223

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