Unrealistically Optimistic Consumers: A Selective Hypothesis Testing Account for Optimism in Predictions of Future Behavior

Abstract

Individuals tend to make unrealistically optimistic self assessments about themselves and their future behavior. While little studied in marketing, unrealistic optimism by consumers may have negative consequences for both marketers and consumers. This dissertation proposes and explores a selective hypothesis testing view of unrealistic optimism. Specifically, I propose that consumers adopt the tentative hypothesis that they will behave in an ideal fashion when predicting their future behavior. They then selectively test this hypothesis by accessing information consistent with it, with the ultimate consequence being unrealistically optimistic predictions of future behavior.To validate this theory I use the following experimental paradigm. I have individuals first provide an idealized estimate for the behavior of interest (e.g., In an ideal world, how often would you exercise next week?) and then provide a second estimate (e.g., How often will you exercise next week?). The idea here is that by making the idealized nature of the ideal behavior salient consumers will be less likely to test a hypothesis of ideal behavior when subsequently providing an estimate. In a series of ten studies, I find that prior consideration of idealistic performance does indeed temper optimism in subsequent self-assessments (henceforth post-ideal estimates). Specifically, post-ideal estimates are free of relative optimism versus expectations of others v behaviors, are more reflective of actual past behavior, and better predict actual future behavior. Furthermore, this attenuation of optimism is mediated by increased consideration of realistic thoughts and is moderated by both expertise and decisiveness.All of these results are consistent with selective hypothesis testing being a key driver of unrealistic optimism. Additionally I demonstrate that the debiasing effect of my method extends from behaviors to above average (and in some cases below average) views of traits and abilities. As such my work raises the possibility that selective hypothesis testing underlies a wide variety of self assessment biases.Having found strong support for my selective hypothesis testing view of unrealistic optimism, I also explore the potential consequences that unrealistic optimism may have for consumer decisions. In particular, I demonstrate that unrealistically optimistic predictions of future behavior appear to be associated with greater willingness to pay for socially desirable products (e.g., treadmills) and that attenuation of such optimism can reduce willingness to pay. Some researchers have argued that unrealistic optimism with respect to future behavior causes people to make vice choices in the present because they expect to make virtuous choices in the future (Kahn and Dhar 2007). If so, then the current research suggests one way to help consumers from falling into the trap of justifying vice behaviors with optimistically held views about future actions.vi

fMRI Evidence of a Hot-Cold Empathy Gap in Hypothetical and Real Aversive Choices

“…Typical consumers are overly optimistic (Weinstein, 1980(Weinstein, , 1987(Weinstein, , 1989Tanner and Carlson, 2009) and are thus expected, in hypothetical situations, to misforecast (i.e., underestimate) the real pain of paying as well as the real badness of consuming bad food. This can be expressed as:…”

“…However, many studies in behavioral economics have shown a substantial, systematic gap: typically, hypothetical valuations are greater than real valuations (Cummings et al, 1995;Johannesson et al, 1998;List and Gallet, 2001;Ariely and Wertenbroch, 2002;Little and Berrens, 2004;Murphy et al, 2005;Blumenschein et al, 2007;Tanner and Carlson, 2009). To remedy this typical upward "Yes" bias, in marketing research conjoint analysis using hypothetical preference data has been extended and improved through hybrid incentive-aligned methods in which an inferred choice will be implemented for real (Ding et al, 2005;Ding, 2007;Dong et al, 2010).…”

“…In public economics and political science, survey data are used to establish the dollar value of goods that are not traded in markets (such as clean air or the prevention of oil spills), and to poll likely voters before an election (Crespi, 1989;Diamond and Hausman, 1994;Carson et al, 1996;Mortimer and Segal, 2008). Hypothetical choices are also necessary in some types of psychology and neuroscience experiments in which measuring real choices is impractical or unethical, especially in the domain of distressing moral choices (Greene et al, 2001(Greene et al, , 2004Kühberger et al, 2002;Hariri et al, 2006;Monterosso et al, 2007).The reliance on hypothetical choice data presumes either that hypothetical choices are a good and legitimate way to forecast real choices, or that there is some knowable relationship between the two types of choices, such that the hypothetical data can be adjusted to forecast real choice data accurately.Abbreviations: WTP, willingness-to-pay; CS, consumer surplus.However, many studies in behavioral economics have shown a substantial, systematic gap: typically, hypothetical valuations are greater than real valuations (Cummings et al, 1995;Johannesson et al, 1998;List and Gallet, 2001;Ariely and Wertenbroch, 2002;Little and Berrens, 2004;Murphy et al, 2005;Blumenschein et al, 2007;Tanner and Carlson, 2009). To remedy this typical upward "Yes" bias, in marketing research conjoint analysis using hypothetical preference data has been extended and improved through hybrid incentive-aligned methods in which an inferred choice will be implemented for real (Ding et al, 2005;Ding, 2007;Dong et al, 2010).…”

“…A hypothetical bias could result from either overvaluation of appetitive goods, or undervaluation of the distaste of paying money, or both, during hypothetical choice. Studying only appetitive goods cannot discriminate which type of biased evaluation is occurring.For aversive bads, overly positive hypothetical evaluation (Tanner and Carlson, 2009) leads to underestimation of two different kinds of disutility-disutility from eating aversive foods and disutility from paying money. If both are underestimated during hypothetical choice, it is unclear which effect is likely to be more dominant a priori, so the difference in hypothetical and real choices is unclear.…”

“…Likewise, all other things being equal, he will be more willing to pay to avoid bad food if the disutility from consuming it increases (e.g., he feels more strongly disgusted by it). These relationships can be mathematically expressed as:Typical consumers are overly optimistic (Weinstein, 1980(Weinstein, , 1987(Weinstein, , 1989Tanner and Carlson, 2009) and are thus expected, in hypothetical situations, to misforecast (i.e., underestimate) the real pain of paying as well as the real badness of consuming bad food. This can be expressed as:…”