TY - JOUR

T1 - Fooled by heteroscedastic randomness

T2 - local consistency breeds extremity in price-based quality inferences

AU - De Langhe, Bart

AU - van Osselaer, Stijn

AU - Puntoni, Stefano

AU - McGill, Ann

PY - 2014

Y1 - 2014

N2 - In some product categories, low-priced brands are consistently of low quality, but high-priced brands can be anything from terrible to excellent. In other product categories, high-priced brands are consistently of high quality, but quality of low-priced brands varies widely. Three experiments demonstrate that such heteroscedasticity leads to more extreme price-based quality predictions. This finding suggests that quality inferences do not only stem from what consumers have learned about the average level of quality at different price points through exemplar memory or rule abstraction. Instead, quality predictions are also based on learning about the covariation between price and quality. That is, consumers inappropriately conflate the conditional mean of quality with the predictability of quality. We discuss implications for theories of quantitative cue learning and selective information processing, for pricing strategies and luxury branding, and for our understanding of the emergence and persistence of erroneous beliefs and stereotypes beyond the consumer realm.

AB - In some product categories, low-priced brands are consistently of low quality, but high-priced brands can be anything from terrible to excellent. In other product categories, high-priced brands are consistently of high quality, but quality of low-priced brands varies widely. Three experiments demonstrate that such heteroscedasticity leads to more extreme price-based quality predictions. This finding suggests that quality inferences do not only stem from what consumers have learned about the average level of quality at different price points through exemplar memory or rule abstraction. Instead, quality predictions are also based on learning about the covariation between price and quality. That is, consumers inappropriately conflate the conditional mean of quality with the predictability of quality. We discuss implications for theories of quantitative cue learning and selective information processing, for pricing strategies and luxury branding, and for our understanding of the emergence and persistence of erroneous beliefs and stereotypes beyond the consumer realm.

U2 - 10.1086/678035

DO - 10.1086/678035

M3 - Journal article

VL - 41

SP - 978

EP - 994

JO - Journal of Consumer Research

JF - Journal of Consumer Research

SN - 0093-5301

IS - 4

ER -