The Role of Market Efficiency Intuitions in Consumer Choice: A Case of Compensatory Inferences

Abstract

The authors examine consumer inferences about product attributes that are unobservable at the time of the decision. Extant research predicts that in the absence of an explicit correlation between product attributes, consumers will infer that the brand that is superior on the observable attributes is also superior on the unobservable attributes. The authors propose an alternative inference strategy that makes the counterintuitive prediction that the apparently superior brand is inferior on the unobservable attributes. The authors refer to these inferences as “compensatory inferences” and assert that they are associated with consumers' intuitive theories about the competitive nature of a market. In a series of four experiments, the authors examine the occurrence of compensatory inferences and compare them with other inference strategies.