You wander around at the store and see a nice looking pair of speakers. You plug in you iPhone and test them out, rocking it out to your favorite tunes. The speakers are very enticing already, but you decide to test out the next, slightly more expensive set just to be sure. Comparing the sounds, the more expensive set sounds just so much clearer, with better bass punch, too… Oh, it’s just so much better! Walking out from the store with a pair of speakers that are way better than your needs, you’ve just exhibited a prime example of context-dependent preferences.
In its simplicity, this bias may sound like an old truth. Sure, our preferences are changed by the context, so what? Unfortunately, in its simplicity lies the problem: this bias has the potential to affect us in almost any situation involving comparisons. And in the modern information era - with comparisons just a few taps away – well, that’s just about any situation. So what’s the bias? To be concise, the point is that choices are affected by changing the choice set, for example by adding new irrelevant alternatives. In effect, this can mean than whereas you this time preferred the high-grade speakers, adding a third middle option might have pushed you to choose the most cheapest, lowest quality ones instead. I’ll explain the theory with the help of a few images, borrowed from Tversky’s and Simonson’s paper.
In its simplicity, this bias may sound like an old truth. Sure, our preferences are changed by the context, so what? Unfortunately, in its simplicity lies the problem: this bias has the potential to affect us in almost any situation involving comparisons. And in the modern information era - with comparisons just a few taps away – well, that’s just about any situation. So what’s the bias? To be concise, the point is that choices are affected by changing the choice set, for example by adding new irrelevant alternatives. In effect, this can mean than whereas you this time preferred the high-grade speakers, adding a third middle option might have pushed you to choose the most cheapest, lowest quality ones instead. I’ll explain the theory with the help of a few images, borrowed from Tversky’s and Simonson’s paper.
If you look at the figure above, it shows three products that are quite different. Product Z is high in quality (attribute 2) but unattractive due to high price (ie. low on “affordability”, attribute 1). Product X, on the other hand, is very cheap but low quality. Product Y is somewhere in between.
The worrying part in the context-dependency is that our choices between options can be largely influenced by adding or removing options. For example, if we start with products X and Z and then add Y, by strategically placing it our choices can be heavily influenced. If Y is placed like in the next figure, a large proportion of decision makers will tend to switch to preferring Z, despite preferring X when they just had a choice between X and Z. Let’s look at a figure that shows this better.
The worrying part in the context-dependency is that our choices between options can be largely influenced by adding or removing options. For example, if we start with products X and Z and then add Y, by strategically placing it our choices can be heavily influenced. If Y is placed like in the next figure, a large proportion of decision makers will tend to switch to preferring Z, despite preferring X when they just had a choice between X and Z. Let’s look at a figure that shows this better.
The reason for the bias is that quality (attribute 2) now seems much more important after seeing that Y has a lot of that, too. X, on the other hand, is still cheap but looks much worse in terms of quality. After all, you don't want to get the lowest quality option. Depending on the setup, this will either lead to picking Y (which is not a bias, since you couldn't choose that initially) or picking X (which is, if you preferred Z initially). If you want to see the equations that clarify how the placement logic works, they are in the Tversky and Simonson’s paper. In addition, the same effect with a different example is very nicely explained here in Dan Ariely's lecture.
The gist of the issue is this: context-dependency means that with some set of options, we would choose X over Z, whereas a change in the option set – for example adding Y – may nudge us to choose Z instead. What you see influences you heavily.
So what’s the problem in preferring X in some situation and Z in another? Well, the problem is twofold. First of all, if our choices are affected by options we don’t even pick in the end – so they should be irrelevant – it can be argued that our sense of what we actually want is problematically limited. Admittedly, this is a big concern in its own right. A bigger issue is the fact that often we don’t get to pick the options we see. What this means is that our choices can be influenced by marketers and other people who have the power to set up the choice situation.
Thankfully, I think there’s a remedy. Contextual choice works in both ways, so you can use it to your advantage, too. When considering what you’d prefer, you can play out the situation by creating different alternatives – even irrelevant ones –and reconsider your choice. This kind of thinking will not only make you less susceptible to choosing on a whim as you consider things more carefully, thinking about other alternatives may give ideas on what’s actually possible in the situation and what you actually value.
The gist of the issue is this: context-dependency means that with some set of options, we would choose X over Z, whereas a change in the option set – for example adding Y – may nudge us to choose Z instead. What you see influences you heavily.
So what’s the problem in preferring X in some situation and Z in another? Well, the problem is twofold. First of all, if our choices are affected by options we don’t even pick in the end – so they should be irrelevant – it can be argued that our sense of what we actually want is problematically limited. Admittedly, this is a big concern in its own right. A bigger issue is the fact that often we don’t get to pick the options we see. What this means is that our choices can be influenced by marketers and other people who have the power to set up the choice situation.
Thankfully, I think there’s a remedy. Contextual choice works in both ways, so you can use it to your advantage, too. When considering what you’d prefer, you can play out the situation by creating different alternatives – even irrelevant ones –and reconsider your choice. This kind of thinking will not only make you less susceptible to choosing on a whim as you consider things more carefully, thinking about other alternatives may give ideas on what’s actually possible in the situation and what you actually value.
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