Context Effects in Managerial Decision Making by Groups and Individuals

Recent research has demonstrated that, contrary to the assumption of value maximization, consumer choices are influenced by the configuration of the set of options under consideration (“context effects”). We examine whether two types of context effects, asymmetric dominance and compromise, also impact managerial choices, made by individual managers or by groups, among alternative marketing strategies. As predicted, the addition of an asymmetrically dominated option increased the share of the dominating strategy when choices were made by individuals, but the effect was less consistent when decisions were made by groups. We also show that, when making strategic choices, both individuals and groups have a tendency to avoid options that appear as compromises in the considered set. A second study demonstrated that options with intermediate values in the considered choice set, which appear as compromises, are perceived as less likely to provide a competitive advantage and as less effective. The theoretical and practical implications of the results are discussed.