The asymmetric dominance effect: Three-attribute phantom alternative at play

• Thesis title in Czech: Efekt asymetrické dominance:; Trojatributní fantom alternativa ve hře
• Thesis title in English: The asymmetric dominance effect: ; Three-attribute phantom alternative at play
• Key words: efekt asymetrické dominance, preference, efekt přitažlivosti, fantom návnada, nedostupná alternativa, spotřebitelský výběr
• English key words: asymmetric dominance effect, preferences, attraction effect, phantom decoy, unavailable alternative, consumer choice
• Academic year of topic announcement: 2014/2015
• Type of assignment: Bachelor's thesis
• Thesis language: angličtina
• Department: Institute of Economic Studies (23-IES)
• Supervisor: Mgr. Jindřich Matoušek, Ph.D.
• Author: hidden - assigned by the advisor
• Date of registration: 20.05.2015
• Date of assignment: 03.06.2015
• Date and time of defence: 06.09.2016 00:00
• Venue of defence: IES
• Date of electronic submission: 25.07.2016
• Date of proceeded defence: 06.09.2016
• Reviewers: PhDr. Tomáš Klinger, Ph.D.

References

Ariely, D. & Wallsten, T.S., 1995. Seeking Subjective Dominance in Multidimensional Space: An Explanation of the Asymmetric Dominance Effect. Organizational Behavior and Human Decision Processes, 63(3), pp.223–232.

Bateman, I., Munro, A. & Poe, G., 2008. Decoy effects in choice experiments and contingent valuation: asymmetric dominance. Land Economics, 84(1), pp.115–127.

Doyle, J.R. et al., 1999. The robustness of the asymmetrically dominated effect: Buying frames, phantom alternatives, and in-store purchases. , 16(3), pp.225–243.

Farquhar, P.H. & Pratkanis, A.R., 1993. Decision Structuring with Phantom Alternatives. Management Science, 39(10), pp.1214–1226.

Herne, K., 1997. Decoy alternatives in policy choices: Asymmetric domination and compromise effects. European Journal of Political Economy, 13(3), pp.575–589.

Highhouse, S., 1996. Context-dependent selection: The effects of decoy and phantom job candidates. Organizational Behavior and Human Decision Processes, 65(1), pp.68-76.

Huber, J., Payne, J.W. & Puto, C., 1982. Adding Asymmetrically Dominated Alternatives: Violations of Regularity and the Similarity Hypothesis. Journal of Consumer Research, 9(1), pp.90-98.

Pan, Y., O'Curry, S. & Pitts, R., 1995. The Attraction Effect and Political Choice in Two Elections. Journal of Consumer Psychology, 4(1), pp.85–101.

Sedikides, C., Ariely, D. & Lsen, N., 1999. Contextual and Procedural Determinants of Partner Selection: Of Asymmetric Dominance and Prominence. Social Cognition, 17(2), pp.118–139.

Simonson, I., 1989. Choice Based on Reasons: The Case of Attraction and Compromise Effects. Journal of Consumer Research, 16(2), pp.158-174.

Simonson, I. & Tversky, A., 1992. Choice in context: Tradeoff contrast and extremeness aversion. Journal of Marketing Research, 29(3), pp.281–295.

Tversky, A., 1972. Elimination by aspects: A theory of choice. Psychological Review, 79(4), pp.281–299.

Tversky, A. & Simonson, I., 1993. Context-dependent Preferences. Management Science, 39(10), pp.1179–1189.

Preliminary scope of work in English

Motivation

Consumer’s choice among alternatives is highly dependent on context, in which the decision making takes place. Particularly, contrary to rational choice theories which build on concept of value maximization, preferences of a decision maker between two given options A and B can be distorted radically in favour of A by adding the third option A‘ (decoy) which is dominated by A in some feature (but not by B), even if A is not preferred option in the setting exclusive of A‘. When first studied, Huber et al. (1982) showed this asymmetric dominance effect (ADE) to violate generally accepted notions about preference relations as regularity, or similarity hypothesis formulated by Tversky (1972), on a consistent basis. Ariely and Wallsten (1995) demonstrated that the effect persists even in a framework where participants were asked to decide which option was chosen the most by other participants. An evidence was found to claim that ADE can affect decision making even in non-market setting such as preferences for political candidates (Pan et al. 1995), job candidates (Highhouse 1996), policy choices (Herne 1997), partner selection (Ariely et al. 1999) or choices concerning environmental issues (Bateman et al. 2008). Various theoretical explanations for ADE were offered during the years. Simonson (1989) pointed out that „justifiability“ play the role in the decision making. Theoretical model by Tversky and Simonson (1993; Simonson & Tversky 1992) takes into account loss aversion and explains ADE by means of contrast effect. ADE is essentially part of a larger phenomenon of so-called decoy effects. The name refers to the notion that when a decoy is added to a set of two choices, the decision makers are likely to shift their choice in anticipated direction. Particularly, phantom decoys which refer to an option added to a choice set which has similar features as normal decoy option, but is for some reason not available to be chosen (Farquhar & Pratkanis 1993). In the real in-store experiment, Doyle et al. (1999) found both asymmetrically dominated decoy and its phantom version to predictably distort the consumer behaviour similarily to laboratory experiments of for example Huber et al. (1982) or Ariely et al. (1999). In this thesis I will propose an experiment in order to test if ADE is observable in the setting where one of the features of given options, in this instance pictures, is number of „likes“ at the social media (Facebook) and the participants are asked to choose the one they find the most appealing. The thesis will improve understanding of the phenomenon of context-dependent valuation of given options and also help to understand the importance of social feedback represented by the number of „likes“ from social media. Finally, these pieces of knowledge may be implicable for online marketing purposes.

Hypotheses
1. Do people perceive information about number of people which „like“ particular picture on the social media (Facebook) valuable enough to be prone to preference reversal when decoy option is added?
2. Is introduction of the third alternative, which is for some reason unavailable (phantom decoy) likely to cause similar effects as the ordinary decoy?
3. Does information about number of „likes“ cause significant change in preference structures over treatments with decoy as well as phantom decoy with respect to the situations in which this information is not considered?

Methodology
An experiment for asymmetric dominance effect will be designed. Following mainly examples of Huber et al. (1982) and Pan et al. (1995), the proposed experiment will consist of two major sections, each divided into three parts. In the first section, participants will be asked to choose one of the available options having two attributes. In the second, the task will be the same, but the number of „likes“ of given choices will be added to the set of attributes. At first, the choice set in both sections will consist of two options. Then, the third option (decoy), which is strictly dominated by one of the original two options, but not the other, will be added to the choice sets in both sections. Finally, the decoy option will be replaced with (information about) phantom decoy. That is, this decoy option will be made unavailable to be chosen.

Outline
1. Introduction
2. Asymmetric dominance effect in literature
3. Design of the experiment
4. Discussion of possible results
5. Conclusion