Business-Economics-Management Seminar

29/10/2013 - 13:00

Speaker:

Dr. Eyal Pe'er

Graduate School of Business Administration

Bar-Ilan University

 

Title:

 

The time-saving bias and its implications for consumer behavior

Abstract:

I examine how consumers’ judgments of time-savings affect their willingness to pay for products and services whose effectiveness is generally measured in terms of speed (e.g., computers, printers, copiers, toll roads, Internet service, etc.). Normatively, product and service speeds maintain a curvilinear relationship with the time it takes to complete a given task (e.g., print 100 pages, drive 10 km or download 100 megabits). This curvilinear relation dictates that similar differences in speed have a higher impact on the task’s duration when the initial speed is relatively low and a smaller impact when the initial speed is high. In contrast, according to the “time-saving bias”, people treat speed as if it is linearly related to duration, underestimating time-savings from relatively low speeds and overestimating time-savings from high speeds. These faulty judgments lead consumers to judge product and service speed as if it is a linear attribute, assessing differences in speed similarly regardless of whether they are made from low or high speeds. I examine the impact of such (faulty) linear time-savings judgments on consumers’ valuation of products and services, as well as on consumers’ willingness to pay for faster products and services. Additionally, I also find that by simply presenting speed measures (e.g., km/h) using pace values (e.g., minutes per 10 km), people’s time-saving judgments, and subsequent choices, can be considerably improved.