Context effects in real life decision making

  • Stefan Sprangers Stefan Sprangers

Context effects are psychological effects that can influence customers’ decisions to buy a certain product. Several researchers have discussed the presence of compromise, attraction and similarity effects in earlier papers. Previous researchers indicated that the middle option in the choice set will be more likely to be chosen (compromise effect). Furthermore, previous researchers indicated that alternatives that dominate one or more of their competitors should have a higher choice probability (attraction effect) and that alternatives are less likely to be chosen if there is a very similar alternative present in the choice set (similarity effect).Until now, the presence of context effects has only been shown in experimental or other manipulated choice environments. My research attempted to investigate whether these context effects were present in real-life, non-manipulated decision making. A dataset of an online mortgage recommendations website was used to investigate whether these effects were presents in real-life. To do this, I created a multinomial choice model that included a context-free utility component and a context-dependent utility component. I found that compromise, attraction and similarity effects were present. Surprisingly, the direction of these effects was not always the same as previous researchers suggested. Possible explanations for these unexpected findings are discussed in this thesis.

Netspar, Network for Studies on Pensions, Aging and Retirement, is a thinktank and knowledge network. Netspar is dedicated to promoting a wider understanding of the economic and social implications of pensions, aging and retirement in the Netherlands and Europe.

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