Ambiguity aversion and the preference for established brands

We propose that ambiguity aversion, as introduced in the literature on decision making under uncertainty, drives a preference for established brands in multiattribute choices among branded alternatives. Established brands are those for which belief in quality is held with greater confidence, even if specific attributes might be inferior to those of competing, less-established brands. In five experiments, we examine the role of ambiguity aversion in the preference for dominated, established brands. We first show a correlation between ambiguity aversion (revealed through choices among monetary lotteries) and the preference for established brands. We then show that the preference for established brands is enhanced when ambiguity aversion is made more salient in unrelated preceding lottery choices. Thus, ambiguity aversion carries across choices. In addition, ambiguity aversion and the preference for established brands are both enhanced when subjects anticipate that others will evaluate their lottery choices. Finally, ambiguous information about brand attributes tends to increase the preference for established brands. Key words: ambiguity; brand preference; decisions under uncertainty; multiattribute choice History: Received January 8, 2009; accepted July 3, 2009, by Peter Wakker, decision analysis. Published online in Articles in Advance October 16, 2009.
Introduction An important finding in the literature on decisionmaking under uncertainty is the preference for gambles with known rather than unknown (ambiguous) probabilities of winning. For example, people betting on [...]