Inference Effects without Inference Making? Effects of Missing Information on Discounting and Use of Presented Information

Simmons, Carolyn J.; Lynch, John

doi:10.1086/208572

Cited by 152 publications

(117 citation statements)

References 27 publications

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“…Gabaix, Laibson, Moloche, and Weinberg [forthcoming] analyze a model of partially myopic exploration of game trees. For the lack of Bayesian updating, Simmons and Lynch [1991] present experimental evidence, and Malmendier and Shanthikumar [2005] field evidence.…”

Section: Introductionmentioning

confidence: 99%

Shrouded Attributes, Consumer Myopia, and Information Suppression in Competitive Markets

Gabaix

Laibson

2006

The Quarterly Journal of Economics

1,135

184

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Bayesian consumers infer that hidden add-on prices (e.g., the cost of ink for a printer) are likely to be high prices. If consumers are Bayesian, firms will not shroud information in equilibrium. However, shrouding may occur in an economy with some myopic (or unaware) consumers. Such shrouding creates an inefficiency, which firms may have an incentive to eliminate by educating their competitors' customers. However, if add-ons have close substitutes, a "curse of debiasing" arises, and firms will not be able to profitably debias consumers by unshrouding add-ons. In equilibrium, two kinds of exploitation coexist. Optimizing firms exploit myopic consumers through marketing schemes that shroud high-priced add-ons. In turn, sophisticated consumers exploit these marketing schemes. It is not possible to profitably drive away the business of sophisticates. It is also not possible to profitably lure either myopes or sophisticates to nonexploitative firms. We show that informational shrouding flourishes even in highly competitive markets, even in markets with costless advertising, and even when the shrouding generates allocational inefficiencies. Copyright (c) 2006 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology..

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Section: Introductionmentioning

confidence: 99%

Shrouded Attributes, Consumer Myopia, and Information Suppression in Competitive Markets

Gabaix

Laibson

2006

The Quarterly Journal of Economics

1,135

184

View full text Add to dashboard Cite

show abstract

“…In these cases, missing information is positively correlated with the criterion value that must be predicted. Finally, people sometimes just use whatever information is available and simply ignore missing information (see Kardes et al, 2008;Sanbonmatsu, Kardes, & Herr, 1992;Simmons & Lynch, 1991). In summary, the empirical evidence shows a large heterogeneity in how people treat missing information, leading to the question of how this heterogeneity can be explained.…”

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confidence: 99%

Adaptive Mechanisms for Treating Missing Information: A Simulation Study

García‐Retamero

Rieskamp

2008

Psychol Rec

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People often make inferences with incomplete information. Previous research has led to a mixed picture of how people treat missing information. To explain these results, the authors follow the Brunswikian perspective on human inference and hypothesize that the mechanism's accuracy for treating missing information depends on how it is distributed in a certain environment. The hypoth-esis is supported by the results of a simulation study, which also shows that the mechanism for treating missing information has a much stronger impact on overall accuracy than the most accurate inference strategies considered. The conclusion is that how people react to missing information could be an adaptive response to specific environments.When making inferences, people are often confronted with incomplete information. Looking for a healthy meal at a restaurant, for instance, we often do not have much detail about the entrées on the menu (e.g., the amount of cholesterol, fat, or preservatives in the dishes, or the cooking methods used) to help us infer which dish would be the wisest choice. Nevertheless, even with incomplete information, people infer which is the healthier option and make their choices. In the present article, the question addressed is how people should make inferences despite incomplete information.The question of how people deal with incomplete information has attracted increasing interest (see Ganzach

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“…Additionally, subjects inferred that the brand extension would possess certain attributes and features, that is, feature-present inferences. This latter type of inference is particularly critical to the former type, as inferring that a brand or product possesses an attribute is necessary for inferring its value (Dick et al, 1990;Simmons & Lynch, 1991). The need for comprehension that can result from an evaluation goal may lead consumers to note missing attributes and to form such interpretive inferences.…”

Section: Discussionmentioning

confidence: 99%

Consumers' beliefs resulting from conceptual combinations: Conjunctive inferences about brand extensions

Bristol

1996

Psychol. Mark.

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Inference Effects without Inference Making? Effects of Missing Information on Discounting and Use of Presented Information

Cited by 152 publications

References 27 publications

Shrouded Attributes, Consumer Myopia, and Information Suppression in Competitive Markets

Shrouded Attributes, Consumer Myopia, and Information Suppression in Competitive Markets

Adaptive Mechanisms for Treating Missing Information: A Simulation Study

Consumers' beliefs resulting from conceptual combinations: Conjunctive inferences about brand extensions

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