Framing Effects in Consumer Preferences

A consumer who is faced with any choice is affected by the context, the conditions in which that choice is made. The way a set of alternatives is presented may influence a person’s choices, even if the set is unchanged. The creation of this context, the set architecture, is called framing. The effect of framing (that is, changing consumer preferences) can be achieved in many different ways. One of such methods may be the introduction of an alternative trap (decoy), the only purpose of which is to change consumer preferences for other alternatives. In this paper, I explore the possibility of using knowledge about the cognitive distortions of a person to improve the financial performance of a company. In particular, I test the efficiency of framing consumer preferences using phantom traps as an example (phantom decoy, Pettibone & Wedell, 2000). The study is based on field experiments conducted in a Moscow catering establishment. Classical economic theory suggests that man is rational. At the end of the twentieth century, the first studies appeared aimed at studying cognitive distortions: systematic deviations in human behavior. The problem aroused great interest among researchers and by now tens of “mistakes” of thinking have been studied. Today this area of scientific knowledge is in demand and has found an application in many different areas. The architects of choice — people who form the context in which decisions are made, whether they are responsible for school meals, menu development, or the doctor familiarizing the patient with possible treatment options — have learned to apply these distortions and actively use them in their own interests. Business owners are particularly interested in this topic: skillfully applying this knowledge in practice, it is possible to significantly improve the company's performance. A relatively new topic in the field of cognitive distortions is the so-called traps (Huber & Puto, 1982), the effect of which has not yet been fully studied. Appearing in a set of alternatives from which a person chooses, a trap can change a person’s preferences for other alternatives. Phantom decoys are explored in this work — a class of traps that can influence a person’s choices even when they are not available to choose from (Pettibone & Wedell, 2000). Scientists have conducted many studies that testify in favor of the effectiveness of such traps. However, the vast majority of works are based on laboratory experiments (Hedgcock, Rao, & Chen, 2009; Pettibone & Wedell, 2007, and others). Based on existing researches, I studied the phenomenon of phantom traps in real conditions. It is a field experiment that is the hallmark of my research. The results can be useful to business owners and managers who are interested in the practical application of mechanisms from the field of behavioral economics. The research question of my work is to evaluate the influence of a phantom decoy in the form of a promotion on the sales volume of an institution. I conducted two experiments to test for the presence of an effect, and the results of both support the lack of effect. Namely, the introduction of a phantom promotion, which consists in offering a 50 percent discount when buying a set that includes food and drink, did not lead to an increase in demand for this set outside the promotion (without a discount). The results I obtained, contradict laboratory results (Hedgcock, Rao, & Chen, 2009; Pettibone & Wedell, 2007) and set the stage for further study of the phenomenon. The work consists of three chapters. The first chapter contains a review of studies devoted to the study of traps and a description of their species. The second chapter describes the cognitive distortions, which can be used to explain their effectiveness. The third chapter contains a description of the research, the results of the experiments and their interpretation.