Relevance insensitivity: A framework of psychological biases in consumer behavior and beyond

Abstract

In judgment and choice, consumers show a variety of biases, from the sunk cost fallacy and projection bias to usage frequency neglect and erroneous price-quality inferences. This article explains these seemingly disparate biases and predicts new biases using an overarching framework based on the relevance insensitivity theory proposed by Hsee et al. (2019). According to the theory, many biases arise because people are insufficiently sensitive to the relevance (i.e., weight) of a cue variable to the target variable (the dependent variable). The direction of the bias depends on the normative relevance of the cue-people over-rely on the cue when it is normatively irrelevant and under-rely on the cue when it is normatively highly relevant. We show that ostensibly unique and universal biases are neither unique nor universal: All are manifestations of relevance insensitivity, and each bias attenuates or reverses as the cue variable's relevance changes.

The first-to-test bias: Impact of testing order on assigning responsibility for contagion

“…In other words, individuals may focus on the notion that that the member who tested positive first was the transmitter, even when testing order is irrelevant. This is consistent with recent research on relevance insensitivity, in which people overgeneralize the importance of factors that are sometimes relevant to situations in which they are not at all relevant [11,12].…”

“…We suggest that the First-To-Test bias can be explained, in part, by considering attribution and anchoring theory [ 8 – 10 ], along with relevance insensitivity and overgeneralization [ 11 , 12 ]. Specifically, when all relevant factors are held constant and only testing order differs, the covariation model of attribution suggests that a person will hone in on the aspect of the situation that is distinctive and covaries with the actions leading up the dyad experiencing the disease [ 10 ].…”

Future–present relationship insensitivity: A new perspective on psychological myopia and psychological hyperopia

“…More generally, recent research shows that people are insensitive to situational variables and may exhibit apparently opposite biases in different situations (e.g., Erev et al, 1994; Hsee et al, 2019; Larrick et al, 2007; Yang et al, 2022). For example, decision‐makers are generally insensitive to the relevance of past costs to future costs and benefits; consequently, they will over‐rely on past costs and hence exhibit the classic sunk cost bias if the past costs are irrelevant to future costs or benefits, and will under‐rely on past costs and exhibit a “reverse sunk cost bias” if the past costs are highly relevant to future costs and benefits (Hsee et al, 2019).…”