The Ease-of-Computation Effect: The Interplay of Metacognitive Experiences and Naive Theories in Judgments of Price Differences

MANOJ THOMAS and VICKI G. MORWITZ
Journal of Marketing Research (JMR)
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Executive Summary
Consumers’ judgments of the magnitude of numerical differences affect various consumption decisions. For example, to evaluate the magnitude and attractiveness of a sale price, consumers usually compare it to a regular price and compute the difference between the displayed regular price and the sale price. It is usually assumed that the attractiveness of a discount depends only on the numerical difference between the regular price and the sale price; the greater these numerical differences, the greater should be the perceived attractiveness of the sale price. In this article, the authors demonstrate that in addition to the numerical difference between two prices (e.g., a regular and a sale price, the prices of two different brands), consumers use the cognitive ease or difficulty of judging the difference between the prices (i.e., the fluency of the computation) as input into their judgments of the magnitude of the price difference. Thus, the authors suggest that consumers use the fluency of numerical computations as information in its own right. Specifically, when consumers find a discount magnitude computation to be surprisingly fluent, they misattribute the fluency to magnitude. The results from a set of experiments show that ease of computation can affect judgments of the magnitude of price differences, discount magnitudes, and brand choices. Consumers judge computationally difficult price differences to be smaller than computationally easy price differences. For example, when presented with two pairs of numbers, participants incorrectly judged the magnitude of the difference to be smaller for pairs with difficult computations (e.g., 4.97 – 3.96, an arithmetic difference of 1.01) than for pairs with easy computations (e.g., 5.00 – 4.00, an arithmetic difference of 1.00). 

Importantly, consumers use the actual magnitude of the discount magnitude and fluency information simultaneously. Thus, the results do not suggest that consumers are merely avoiding calculating when the task is more difficult; rather, they do the calculation but also use computation fluency as an input into their discount magnitude judgments. Finally, the role of computational fluency is clarified by demonstrating that the effect is reduced under certain conditions. Specifically, the effect does not manifest when judgments do not entail mental computations or when participants are made aware that the ease or difficulty is caused by computational complexity. Furthermore, this effect was mitigated when participants’ prior experience was manipulated in a learning phase of the experiment.

The findings have implications for buyer and seller behavior. Managers often face the decision of whether they should round prices to the nearest dime/dollar or use precise markups and thus pass on the last penny to consumers. The findings highlight the importance of choosing the right digits for prices. Although using precise markups might save consumers a few pennies, it also makes mental computations difficult, which in turn might affect magnitude perceptions. Using precise prices can hurt sales of products that are offered on discount because this lowers the perceived magnitude of the discount. Conversely, using precise prices for an expensive brand could help sales because computational difficulty makes the price difference appear smaller.

Biography
Manoj Thomas is Assistant Professor of Marketing in the S.C. Johnson Graduate School of Management at Cornell University. He holds an MBA from the Indian Institute of Management Calcutta and a PhD in Marketing from the Stern School of Business at New York University. His current research interests include the role of fluency and nonconscious processes in consumer judgments, mental representation and processing of numerical stimuli, behavioral pricing, and the effects of construal level on judgments. His work has been published in Journal of Consumer Research and Journal of Marketing Research. He teaches strategic brand management and product management in the S.C. Johnson Graduate School of Management at Cornell University.

Vicki G. Morwitz is Research Professor of Marketing in the Stern School of Business at New York University. She received a BS in Computer Science and Applied Mathematics from Rutgers University, an MS in Operations Research from Polytechnic University, and an MA in Statistics and a PhD in Marketing from the Wharton School at the University of Pennsylvania. Her research interests include the relationship between purchase intentions and purchase behavior; behavioral aspects of pricing; and the effects of responding to and exposure to market research surveys on attitudes, intentions, and behavior. She teaches the marketing core, marketing research, marketing of technology-based products, and doctoral classes in judgment and decision making. Her work has appeared in Harvard Business Review, International Journal of Forecasting, Journal of Consumer Psychology, Journal of Consumer Research, Journal of Marketing Research, Management Science, and Marketing Letters. She has worked at IBM, Prodigy Services, and RCA.

J Marketing Research, Volume 46, Number 1, February 2009
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MANOJ THOMAS and VICKI G. MORWITZ
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