Stereotyping and Marketing: Out-Group Homogeneity Bias and Entry to Competitive Markets

Neil Bendle () and Andrew Perkins
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Neil Bendle: Western University
Andrew Perkins: Washington State University

Customer Needs and Solutions, 2020, vol. 7, issue 1, No 1, 11 pages

Abstract: Abstract Marketers seeking to understand diverse customers risk using stereotypes. That market forces will deal with the problem of stereotyping may be an overly strong assumption and so we ask: (1) How might OGHB impact a marketing decision? And (2) are the effects of this likely to persist in markets, i.e., does it matter? Our research combines the psychology of prejudice with game theory to model competitive market outcomes. We model marketers relying on stereotypes—technically experiencing out-group homogeneity bias (OGHB); the tendency to perceive out-groups as less varied simply because we are unable to identify with them. Our core finding is that in competitive market entry OGHB can have negative consequences for the competitor of those experiencing the bias. This comes from a reduction in the value of the market, rather than any gains made by those employing stereotypes. Bias resembles a negative externality and non-market efforts to reduce stereotyping may be in the interests of not just consumers but also the competitors of those using stereotypes.

Keywords: Out-group homogeneity bias; Market entry; Behavioral game theory; Strategic marketing; Analytical methods (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1007/s40547-019-00097-y

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