When two wrongs make a right: The efficiency-consumption gap under separate vs. joint evaluations

Abstract

AbstractThe MPG illusion and the time-saving bias both show that people misjudge the gains from increases in efficiency or speed, because people falsely believe that efficiency and speed are linearly related to consumption (e.g., gallons of fuel or journey time). This efficiency-consumption gap (ECG) has been demonstrated consistently in various situations. In parallel, people have also been found to show a diminished sensitivity to increases in magnitudes when judged under separate vs. joint evaluation modes (SE vs. JE). We show that these “two wrongs can make a right”: when people judge efficiency upgrades under SE mode, their subjective judgments follow a concave curve that closely resembles the curvilinear pattern of efficiency upgrades, making their preferences (artificially) less biased than they are under JE. In two studies we show that when asked for their willingness-to-pay (WTP) for upgrading products or services in two (a smaller vs. a larger) upgrade options, WTPs are less different in SE vs. JE modes. This means that people are exhibiting lower sensitivity to the upgrade size under SE which leads to a de-biasing effect. We show that because JE follow a linear trend, it yields biased preferences for efficiency measures, but not for consumption measures. In contrast, SE yield biased preferences for consumption, but not for efficiency measures.