Biases in Valuation Vs. Usage of Innovative Product Features

We investigate biases in product valuation and usage decisions that arise when consumers consider a new generation of a product that offers an expanded set of capabilities of uncertain value. Two experiments using a novel computer game show evidence of a valuation-usage disparity: Participants displ...

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Main Authors: Meyer, Robert J., Zhao, Shenghui, HAN, Jin K.
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Language:English
Published: Institutional Knowledge at Singapore Management University 2008
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Online Access:https://ink.library.smu.edu.sg/lkcsb_research/1293
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Institution: Singapore Management University
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spelling sg-smu-ink.lkcsb_research-22922010-09-23T06:24:04Z Biases in Valuation Vs. Usage of Innovative Product Features Meyer, Robert J. Zhao, Shenghui HAN, Jin K. We investigate biases in product valuation and usage decisions that arise when consumers consider a new generation of a product that offers an expanded set of capabilities of uncertain value. Two experiments using a novel computer game show evidence of a valuation-usage disparity: Participants display a high willingness to pay for a new version of the game that offers a new set of controls, but fail to fully exercise the option to use these controls after purchase. This discrepancy is attributed to a fundamental difference in how new capabilities are valued at the time of purchase versus use. Consumer usage decisions appear to be driven by such myopic concerns as a desire to avoid short-term learning costs, whereas purchase decisions often fail to take into account the factors that drive usage, and are further inflated by global optimism in the future usefulness of new capabilities. We show that this lack of foresight can be explained by an intertemporal judgment model in which consumers attempt to value the option to use new capabilities as would be prescribed by economic theory, but are prone to hyperbolic discounting in their temporal valuation of present versus future costs and benefits. 2008-01-01T08:00:00Z text https://ink.library.smu.edu.sg/lkcsb_research/1293 info:doi/10.1287/mksc.1080.0367 Research Collection Lee Kong Chian School Of Business eng Institutional Knowledge at Singapore Management University new product adoption judgment under uncertainty hyperbolic discounting optimism bias projection bias option theory Marketing
institution Singapore Management University
building SMU Libraries
continent Asia
country Singapore
Singapore
content_provider SMU Libraries
collection InK@SMU
language English
topic new product adoption
judgment under uncertainty
hyperbolic discounting
optimism bias
projection bias
option theory
Marketing
spellingShingle new product adoption
judgment under uncertainty
hyperbolic discounting
optimism bias
projection bias
option theory
Marketing
Meyer, Robert J.
Zhao, Shenghui
HAN, Jin K.
Biases in Valuation Vs. Usage of Innovative Product Features
description We investigate biases in product valuation and usage decisions that arise when consumers consider a new generation of a product that offers an expanded set of capabilities of uncertain value. Two experiments using a novel computer game show evidence of a valuation-usage disparity: Participants display a high willingness to pay for a new version of the game that offers a new set of controls, but fail to fully exercise the option to use these controls after purchase. This discrepancy is attributed to a fundamental difference in how new capabilities are valued at the time of purchase versus use. Consumer usage decisions appear to be driven by such myopic concerns as a desire to avoid short-term learning costs, whereas purchase decisions often fail to take into account the factors that drive usage, and are further inflated by global optimism in the future usefulness of new capabilities. We show that this lack of foresight can be explained by an intertemporal judgment model in which consumers attempt to value the option to use new capabilities as would be prescribed by economic theory, but are prone to hyperbolic discounting in their temporal valuation of present versus future costs and benefits.
format text
author Meyer, Robert J.
Zhao, Shenghui
HAN, Jin K.
author_facet Meyer, Robert J.
Zhao, Shenghui
HAN, Jin K.
author_sort Meyer, Robert J.
title Biases in Valuation Vs. Usage of Innovative Product Features
title_short Biases in Valuation Vs. Usage of Innovative Product Features
title_full Biases in Valuation Vs. Usage of Innovative Product Features
title_fullStr Biases in Valuation Vs. Usage of Innovative Product Features
title_full_unstemmed Biases in Valuation Vs. Usage of Innovative Product Features
title_sort biases in valuation vs. usage of innovative product features
publisher Institutional Knowledge at Singapore Management University
publishDate 2008
url https://ink.library.smu.edu.sg/lkcsb_research/1293
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