TY - JOUR
T1 - When two plus two is not equal to four
T2 - Errors in processing multiple percentage changes
AU - Chen, Haipeng
AU - Rao, Akshay R.
PY - 2007
Y1 - 2007
N2 - When evaluating the net impact of a series of percentage changes, we predict that consumers may employ a "whole number" computational strategy that yields a systematic error in their calculation. We report on three studies conducted to examine this issue. In the first study we identify the computational error and demonstrate its consequences. In a second study, we identify several theoretically driven boundary conditions for the observed phenomenon. Finally we demonstrate in a real-world retail setting that, consistent with our premise, sequential percentage discounts generate more purchasers, sales, revenue, and profit than the economically equivalent single percentage discount.
AB - When evaluating the net impact of a series of percentage changes, we predict that consumers may employ a "whole number" computational strategy that yields a systematic error in their calculation. We report on three studies conducted to examine this issue. In the first study we identify the computational error and demonstrate its consequences. In a second study, we identify several theoretically driven boundary conditions for the observed phenomenon. Finally we demonstrate in a real-world retail setting that, consistent with our premise, sequential percentage discounts generate more purchasers, sales, revenue, and profit than the economically equivalent single percentage discount.
UR - http://www.scopus.com/inward/record.url?scp=35348925879&partnerID=8YFLogxK
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U2 - 10.1086/518531
DO - 10.1086/518531
M3 - Article
AN - SCOPUS:35348925879
SN - 0093-5301
VL - 34
SP - 327
EP - 340
JO - Journal of Consumer Research
JF - Journal of Consumer Research
IS - 3
ER -