The Effect of Probability and Consequence Levels on the Focus of Consumer Judgments in Risky Situations

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Abstract
Consumer information processing is examined in two types of risky purchase situations: High-Probability/Low-Consequences situations are similar to purchases of new grocery products and Low-Probability/High-Consequences situations are similar to purchases of airline tickets. Prospect theory is drawn upon to hypothesize that probabilities will be more important to consumers in HPLC situations and that consequences will be more important to them in LPHC situations. Experimental data confirm this hypothesis. Protocol data indicate that people judging LPHC situations process information differently than described by prospect theory. Potential implications for warranties and related communications are discussed.

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