Nathan Novemsky

The Boundaries of Loss Aversion

In this article, the authors propose some psychological principles to describe the boundaries of loss aversion. A key idea is that exchange goods that are given up “as intended” do not exhibit loss aversion. For example, the authors propose that money given up in purchases is not generally subject to loss aversion. The results of several experiments provide preliminary support for the hypotheses. The authors find that, consistent with prospect theory, loss aversion provides a complete account of risk aversion for risks with equal probability to win or lose. The authors propose boundaries for this result and suggest further tests of the model.

Preference Fluency in Choice

The authors propose that consumer choices are often systematically influenced by preference fluency (i.e., the subjective feeling that forming a preference for a specific option is easy or difficult). Four studies manipulate the fluency of preference formation by presenting descriptions in an easy- or difficult-to-read font (Study 1) or by asking participants to think of few versus many reasons for their choice (Studies 2–4). As the authors predict, subjective experiences of difficulty increase choice deferral (Studies 1 and 2) and the selection of a compromise option (Studies 3 and 4), unless consumers are induced to attribute the experience to an unrelated cause. Unlike studies of decision conflict, these effects are obtained without changing the attributes of the alternatives, the composition of the choice sets, or the reference points. The authors discuss the theoretical and practical implications of the results.

Consumer Control and Empowerment: A Primer

This paper introduces consumer empowerment as a promising research area. Going beyond lay wisdom that more control is always better, we outline several hypotheses concerning (a) the factors that influence the perception of empowerment, and (b) the consequences of greater control and the subjective experience of empowerment on consumer satisfaction and confidence.

Making Low Probabilities Useful

This paper explores how people process information on low probability-high consequence negative events and what it will take to get individuals to be sensitive to the likelihood of these types of accidents or disasters. In a set of experiments, information is presented to individuals on the likelihood of serious accidents from a chemical facility. Comparisons are made with other risks, such as fatalities from automobile accidents, to see whether laypersons can determine the relative safety of different plants. We conclude that fairly rich context information must be available for people to be able to judge differences between low probabilities. In particular, it appears that one needs to present comparison scenarios that are located on the probability scale to evoke peoples own feelings of risk. The concept of evaluability recently introduced by Hsee and his colleagues provides a useful explanation of these findings.

Opportunity Cost Neglect

To properly consider the opportunity costs of a purchase, consumers must actively generate the alternatives that it would displace. The current research suggests that consumers often fail to do so. Even under conditions promoting cognitive effort, various cues to consider opportunity costs reduce purchase rates and increase the choice share of more affordable options. Sensitivity to such cues varies with chronic dispositional differences in spending attitudes. We discuss the implications of these results for the marketing strategies of economy and premium brands.

The Time Course and Impact of Consumers' Erroneous Beliefs about Hedonic Contrast Effects

Results from four experiments indicate that people expect to enjoy an experience more when it will follow a worse experience. We find that consumers expect hedonic contrast effects even when they do not experience such effects. Whereas individuals remember the absence of contrast effects after a short delay (study 1), individuals reporting retrospective judgments after a long delay (study 2) recalled that they had experienced contrast effects. These biased memories about contrast effects are eliminated when individuals focus on enjoyment during the experience. The present experiments document the time course of erroneous beliefs about contrast effects, mechanisms underlying their resistance to change, and the impact of these expectations about contrast effects on consumer choice.

How Do Intentions Affect Loss Aversion

Previously (see Novemsky and Kahneman 2005), the authors proposed that intentions to exchange versus to consume a good moderate loss aversion for that good. In this rejoinder, the authors follow up on this idea, discussing several mechanisms that Ariely, Huber, and Wertenbroch (2005) propose by which intentions can moderate loss aversion. The authors consider both emotional attachment to the good and cognitive focus during evaluation as potential mediators of the effects of intentions on loss aversion.

Trade-Offs and Depletion in Choice

Four experiments examine why choices deplete executive resources. The authors show that the resolution of trade-offs is a driver of depletion effects arising from choice, and the larger the trade-offs, the greater is the depletion effect. The authors also find that choice difficulty not related to trade-offs does not influence the depleting effect of the choices. Finally, the authors find that though people can intuit some depletion effects, they do not intuit that choices or trade-offs within choices might be depleting and therefore fail to predict that larger trade-offs are more depleting.

Goal Fulfillment and Goal Targets in Sequential Choice

This article examines the effect of goal fulfillment on choices made in the context of an ongoing sequence of experiences. We find that a good first experience produces an upward shift in the target level of goal achievement. When a higher level of goal attainment is offered by a risky option, that option will be preferred more following a good experience than following a bad experience. Several studies show that this pattern applies only to risk related to the content of the active goal and only to risk that offers the possibility of a higher level of goal achievement than a riskless option.

Anticipating Adaptation to Products

Many consumer products deliver their utility over time, and the decision to purchase such products often depends on predictions of future product enjoyment. The present research shows that consumers often fail to predict hedonic adaptation to products and explores the antecedents and consequences of this misprediction. We demonstrate that the failure to predict diminishing enjoyment with a product arises because of a failure to spontaneously consider adaptation and apply correct intuitive beliefs about adaptation. We further show that making prospective duration salient can cue beliefs about hedonic adaptation. Finally, we find that these beliefs, once cued, influence choices.