Description Versus Experience for Decisions About Discounts

Abstract

AbstractThe description–experience gap in risky choice behavior is the finding that people tend to overweight rare events when making description-based decisions, whereas they tend to underweight rare events when making experience-based decisions. In the present study, the authors investigated whether the gap, which is studied mainly in the context of monetary gambles, generalizes to the context of retail discounts in the consumer domain. In 3 experiments, subjects made description- or experience-based decisions about safe and risky discounts (scratch-and-save promotions). When discounts were expressed as percentages without a reference point, there was no evidence of a gap (Experiment 1). When discounts were expressed in dollars with an explicit reference point, there was evidence of a partial gap, such that experience subjects chose the risky promotion more often than description subjects did but only when the large discount occurred with high probability (Experiments 2 and 3). In all experiments, experience subjects tended to be more rational than description subjects when choosing between promotions with different expected values. Possible reasons for the pattern of results are discussed.