Decision Field Theory - Decision Field Theory - Explaining Context Effects

Explaining Context Effects

The DFT is capable of explaining context effects that many decision making theories are unable to explain. Many classic probabilistic models of choice satisfy two rational types of choice principles. One principle is called independence of irrelevant alternatives, and according to this principle, if the probability of choosing option X is greater than option Y when only X,Y are available, then option X should remain more likely to be chosen over Y even when a new option Z is added to the choice set. In other words, adding an option should not change the preference relation between the original pair of options. A second principle is called regularity, and according to this principle, the probability of choosing option X from a set containing only X and Y should be greater than or equal to the probability of choosing option X from a larger set containing options X, Y, and a new option Z. In other words, adding an option should only decrease the probability of choosing one of the original pair of options. However, empirical findings obtained by consumer researchers studying humam choice behavior have found systematic context effects that systematically violate both of these principles.

The first context effect is the similarity effect. This effect occurs with the introduction of a third option S that is similar to X but it is not dominated by X. For example, suppose X is a BMW, Y is a Ford focus, and S is an Audi. The Audi is similar to the BMW because both are not very economic but they are both high quality and sporty. The Ford focus is different from the BMW and Audi because it is more economical but lower quality. Suppose in a binary choice, X is chosen more frequently than Y. Next suppose a new choice set is formed by adding an option S that is similar to X. If X is similar to S, and both are very different from Y, the people tend to view X and S as one group and Y as another option. Thus the probability of Y remains the same whether S is presented as an option or not. However, the probability of X will decrease by approximately half with the introduction of S. This causes the probability of choosing X to drop below Y when S is added to the choice set. This violates the independence from irrelevant alternatives property because in a binary choice, X is chosen more frequently than Y, but when S is added, then Y is chosen more frequently than X.

The second context effect is the compromise effect. This effect occurs when an option C is added that is a compromise between X and Y. For example, when choosing between C = Honda and X = BMW, the latter is less economical but higher quality. However, if another option Y = Ford Focus is added to the choice set, then C = Honda becomes a compromise between X = BMW and Y = Ford Focus. Suppose in a binary choice, X (BMW) is chosen more often than C (Honda). But when option Y (Ford Focus) is added to the choice set, then option C (Honda) becomes the compromise between X (BMW) and Y (Ford Focus), and C is then chosen more frequently than X. This is another violation of the independence from irrelevant alternatives property because X is chosen more often than C in a binary choice, but C when option Y is added to the choice set, then C is chosen more often than X.

The third effect is called the attraction effect. This effect occurs when the third option D is very similar to X but D is defective compared to X. For example D may be a new sporty car developed by a new manufacturer that is similar to option X = BMW, but costs more than the BMW. Therefore, there is little or no reason to choose D over X, and in this situation D is rarely ever chosen over X. However, adding D to a choice set boosts the probability of choosing X. In particular, the probability of choosing X from a set containing X,Y,D is larger than the probability of choosing X from a set containing only X and Y. The defective option D makes X shine, and this attraction effect violates the principle of regularity, which says that adding another option cannot increase the popularity of an option over the original subset.

DFT accounts for all three effects using the same principles and same parameters across all three findings. According to DFT, the attention switching mechanism is crucial for producing the similarity effect, but the lateral inhibitory connections are critical for explaining the compromise and attraction effects. If the attention switching process is eliminated, then the similarity effect disappears, and if the lateral connections are all set to zero, then the attraction and compromise effects disappear. This property of the theory entails an interesting prediction about the effects of time pressure on preferences. The contrast effects produced by lateral inhibition require time to build up, which implies that the attraction and compromise effects should become larger under prolonged deliberation (see Roe et al.). Alternatively, if context effects are produced by switching from a weighted average rule under binary choice to a quick heuristic strategy for the triadic choice, then these effects should get larger under time pressure. Empirical tests show that prolonging the decision process increases the effects and time pressure decreases the effects.