Financial Product Choices: Does Attribute Preference Help Avoid the Attraction Effect?

Abstract

The attraction effect occurs when a third option is added to two seemingly equivalent options but it competes against only one of the original options. This increases the likelihood of the dominating option being chosen. In attraction effect studies, it is assumed that both attributes of the options are of equal importance to the decision maker. We aimed to examine whether attribute preference would affect the occurrence of the attraction effect when choosing financial products. A total of 487 undergraduate students were randomly assigned to groups with the financial product choice of two or three options. We found that when participants had no clear attribute preference the attraction effect occurred more frequently. Those with a clear preference for one attribute succumbed to the effect only when choosing a product unfamiliar to them. The research sheds light on two conditions of the attraction effect: the product familiarity and the attribute preference.

Keywords

• attraction effect
• financial product choices
• attribute importance