Temporal Shifts in Perceived Similarity Affect Consumer Valuation and Choice

Temporal Shifts in Perceived Similarity Affect Consumer Valuation and Choice Oleg Urminsky (oleg.urminsky@chicagobooth.edu) University of Chicago Booth School of Business 5807 S. Woodlawn Ave., Chicago, IL 60637 USA Daniel M. Bartels (dmb2199@columbia.edu) Columbia University, Uris 502 3022 Broadway, New York, NY 10027 USA Abstract Building on research that examines the nature of similarity processes, we suggest that (i) assessments of the similarity between objects shifts systematically depending on the basis used to evaluate similarity, which is influenced by contextual factors; (ii) judgments and choices can be affected by the perceived similarity relations between items in a set; and (iii) such shifts in similarity can therefore play a key role in inferences impacting valuation and choice. In three studies, we show that changes in temporal framing (near future vs. distant future) impact evaluation and choice due to shifts in the basis of perceived similarity, leading to effects that would otherwise be unanticipated. In particular, we find that manipulating temporal context impacts evaluation and choice via its influence on which attributes form the basis of perceived similarity between choice alternatives, in addition to any direct influence it might have on preferences. Introduction Similarity is implicated in nearly every fundamental cognitive process (e.g., perception—Wertheimer 1923, recall—Hintzman 1984; categorization—Medin and Schaffer 1978; inductive inference—Hummel and Holyoak 1997; analogy—Gentner and Markman 1997). Therefore, any factor that influences perceived similarity is likely to have a profound impact on cognition more generally and on decision making specifically. Despite the parallels between similarity and choice processes, as well as the role of similarity in structuring informational inputs to decisions (Medin, Goldstone and Markman 1995; Markman and Loewenstein 2010), similarity has played a far less central role in research on evaluation and choice than other factors, such as subjective utility and decision weights. In early work, similarity was often treated as simply another fixed attribute, determined by concrete features of the objects under consideration. Thus, for example, work on the substitutability of objects often implicitly assumes that the comparative similarity in features determines choice cannibalization (i.e., the degree to which two alternatives swap out for each other in a market; Rumelhart and Greeno 1971; Huber and Puto 1983). Similarly, research has suggested that the degree to which consideration of one item influences predictions and estimates about a second item depends on the degree of comparative similarity, defined over the features of the items (Gilovich 1981; Read 1983; Loken, Ross and Hinkle 1986). In recent years, decision researchers have explored the impact of a wide range of contextual factors external to the decision (as opposed to the context defined by the choice options themselves). One particularly influential stream of research has been work on how different forms of psychological distance (including temporal context) affect construal level and shift relative preference for concrete vs. abstract benefits (see Trope, Liberman and Wakslak 2007 for a detailed review). According to construal level theory, contextual factors that induce a sense of psychological distance (including but not limited to time) prompt a higher level of abstraction in subsequent judgments. Therefore, when people are thinking about concepts at great psychological distance (e.g., in a distant future context), they tend to think of them in abstract, holistic, and gist-like terms. In contrast, when thinking of concepts at greater psychological proximity (e.g., in a near future context), people think in more concrete, more detailed terms. There is some initial evidence that construal level can affect how people think about similarity. Day and Bartels (2008) asked participants to judge the similarity of pairs of events, such as visiting the dentist and joining a health club (which are both health-promotion behaviors) or visiting the dentist and getting a tattoo (which share the concrete features of a reclining chair, needles and pain). They found that pairs of events sharing abstract commonalities (e.g., dentist and health club) were judged more similar with greater temporal distance while the opposite trend held for pairs sharing low-level concrete features (e.g., dentist and tattoo). These similarity findings suggest an unstudied impact of construal level on representation, distinct from the widely studied impact of construal on how abstract and concrete benefits are valued. We propose that people thinking about distant future choices are likely to engender more abstract representations of the choice alternatives and thus put more emphasis on attributes with abstract or intangible benefits when judging similarity and that people thinking about near future choices are more likely to engender more detailed, concrete representations and thus put more emphasis on attributes with concrete tangible benefits in evaluating similarity. These shifts in the similarity relations between choice alternatives, in turn, can affect the inferences underlying valuation and choice. Study 1: Shifts in the Basis of Similarity Due to Temporal Context Affect Willingness to Pay In this study, we demonstrate a parallel between how an “ideal” option (with high values on all the relevant attributes) influences both similarity and preference evaluations (Medin, Goldstone and Markman 1995; Kaplan