Relevance insensitivity: A framework of psychological biases in consumer behavior and beyond

Abstract

In judgment and choice, consumers show a variety of biases, from the sunk cost fallacy and projection bias to usage frequency neglect and erroneous price–quality inferences. This article explains these seemingly disparate biases and predicts new biases using an overarching framework based on the relevance insensitivity theory proposed by Hsee et al. (2019). According to the theory, many biases arise because people are insufficiently sensitive to the relevance (i.e., weight) of a cue variable to the target variable (the dependent variable). The direction of the bias depends on the normative relevance of the cue—people over-rely on the cue when it is normatively irrelevant and under-rely on the cue when it is normatively highly relevant. We show that ostensibly unique and universal biases are neither unique nor universal: All are manifestations of relevance insensitivity, and each bias attenuates or reverses as the cue variable's relevance changes.