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Upgrading or Downgrading? \ Framing Effects in Online Shopping Environments \

Author

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  • Nozomi NAKAJIMA

    () (Graduate School of Economics, Osaka University)

Abstract

Recent development in behavioral decision theory reveals the important role of decision environment in the consumer's evaluation and choice processes. Often it is referred as "decision framing." Of particular interest is the online shopping environment, where buyers are usually forced to make their decisions under the sellers' (programmed) guidance on their web sites. How can the decision frames constructed in online shopping environment influence consumers' decision making? What should be done to exploit the characteristics of their framed decisions in the design of online shopping environments? In the present study, we considered an online PC shop as an example because it is one of the most popular and typical online shops and it will help us get insights into the consumers' online-framed decision characteristics. Buyers are usually led to specify the configurations of personal computers, i.e., CPU, memory and hard drive size, type of optical drives, etc., taking their preferences and budgets into account. In the course of specification processes, their decisions are framed in some ways and influenced by them. Among other things, the way the choice alternatives are presented (upgrading/ downgrading, etc.), from which buyers are expected to choose, is of special interest because it can be easily controlled by the sellers. Experimental studies were conducted to investigate the influence of some decision frames including the flow of selection process, the number of alternatives, the price intervals of the alternatives, and the default choice settings. The extremeness aversion, the shifts of the reference points, and the tradeoff between utility and economic loss aversion, are the examples of the involved effects. Above all, particular attention was paid to the default choice settings that provide the total prices as well as the reference points. Based on the results of the experiments, a set of theoretical conclusions and managerial implications of default choice settings are discussed.

Suggested Citation

  • Nozomi NAKAJIMA, 2011. "Upgrading or Downgrading? \ Framing Effects in Online Shopping Environments \," Discussion Papers in Economics and Business 11-23, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).
  • Handle: RePEc:osk:wpaper:1123
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    Keywords

    online shopping; decision framing; pricing; choice model;

    JEL classification:

    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing
    • C44 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Operations Research; Statistical Decision Theory
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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