Mixing Virtue & Vice: Combining the Immediacy Effect and the Diversification Heuristic (Read, Loewenstein, and Kalyanarman, 1999)

1. Mixing Virtue & Vice
Combining the Immediacy Effect
and the Diversification Heuristic
Read, Loewenstein, and Kalyanarman, 1999
Paul M. Cohen | MGMT 758

2. Vices, Virtues, and Choice
Vices Virtues
exchange small exchange small
immediate rewards immediate cost for
for large delayed costs large delayed rewards
(more long-run utility)
Simultaneous Choice Sequential Choice
4 1
1
1
1
Simonson (1990)

3. Diversification Heuristic
Simultaneous Choice Sequential Choice
Take into account
preference interactions
Not think about preference
between goods
interactions
(complements or
substitutes)
Apply diversification No need for diversification
heuristic heuristic
More variety Not so much variety
Simonson & Winer (1992)

4. Immediacy Effect
Simultaneous Choice Sequential Choice
Alternatives are not Alternatives are
consumed immediately consumed immediately
Favor an initial
Favor small immediate
immediate reward but
rewards over big rewards
will wait for later rewards
Simonson & Winer (1992)

5. Predictions
Simultaneous Choice Sequential Choice
Diversification | Immediacy Diversification | Immediacy
Favor an initial
Not so Favor immediate
More immediate reward
much rewards over big
variety but will wait for
variety rewards
later rewards
Mix of Either
Uniform stream of
vices and Begin with vice vices or
vices
virtues virtues
Vices and virtues More vices

6. Experiments & Results
Lowbrow Highbrow Sequential Simultaneous
Choice Types
chose each chose three movies on
movie the one day, watch one
Films
day you per day with two days
watch it in between
Results
• More highbrow movies were chosen in simultaneous (59%) versus
sequential (43%) conditions [p < 0.05]
• No difference in proportion of highbrow movies selected for first day in
either condition (since they were viewed immediately)
• More highbrow movies were chosen in later days for the simultaneous
choice group (67%) than on the first day (44%) [p< 0.02] + correlation
between day and percentage choosing highbrow movies