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In their buying decisions, American consumers are too forgiving of information gaps, study suggests

July 18, 2017

For more information, contact: Ben Haimowitz, (718) 398-7642, press@aom.org

It may not come as a shock in a country that recently elected a president who declined to disclose his tax returns, but some new research suggests that, when American consumers make buying decisions, they are much more tolerant of information gaps than reason posits they should be.

This is the conclusion that emerges from a series of experiments in which a total of some 1,700 individuals were asked to make choices about doctors when important pieces of information were sometimes missing. Given the current state of flux of national health-care policy, it is a dilemma many people may very well be confronting in the near future.

In the words of the paper reporting the experiments, which will be presented at the forthcoming annual meeting of the Academy of Management (Atlanta, Aug. 4-8), "people were too forgiving towards the absence of information and did not infer any negative meaning towards it even when aware that the doctor did not provide information..., Consumers appear not to hear when told something is missing."

For example, in one of the experiments, which were carried out by Sunita Sah of Cornell University and Daniel Read of the University of Warwick, 1,104 U.S. citizens enlisted via a crowd-sourcing Internet service were asked to choose between fictional doctors on the basis of ratings given them by their patients on five specific aspects of care. On what is arguably the most important of the five, trustworthiness, participants were no more likely to choose a doctor who garnered an intermediate score than one who had no rating, even when it was clearly indicated this information was missing.

The experiment leads the authors to observe that “consumers are more likely to choose a provider with missing information than one who fully discloses poor information…For missing or blank information, an intermediate level of trustworthiness is assumed."

And such an assumption, they make clear, runs counter to norms of rationality that a large body of economic research has developed over decades. According to this thinking, known as unraveling, evidence that information is being withheld ought to lead consumers to assume the worst. The idea, the professors explain, is that, "if providers or organizations possess information that might bear on how consumers evaluate them, and if those consumers know they possess the information...non-disclosure will be interpreted as meaning the information is the worst possible."

Such thinking, the authors acknowledge, has produced some notable successes. For example, in Los Angeles, when restaurants were required to display cards in their windows indicating their grades in hygiene inspections, the cards "had a positive effect in that restaurants all improved their hygiene to get a better rating." In another instance, the American Medical Student Association embarked on a campaign to grade academic medical centers on conflicts of interest, to which the centers responded by implementing stronger policies "rather than refusing to disclose information...which [might have been] inferred as Grade F or worse."

Yet, when it comes predicting the behavior of consumers, this way of thinking leaves much to be desired: As three experiments reported by the professors demonstrate, consumers turn out to be a lot more trusting than rationality would seem to warrant. In addition to the experiment described above, two others were as follows:

■ Four hundred ninety-three U.S. citizens, enlisted through a crowd-sourcing Internet service, were presented with patients' ratings of fictional doctors on four of five aspects of care. They were given one of three reasons why information was missing on the remaining dimension – it was either "randomly removed" or “not provided," or "refused – and were asked to estimate a rating for the missing dimension. Although subjects bestowed a low average rating if told the information was refused, the higher estimates in the other two conditions – “not provided” and “randomly removed” – were about the same, leading the professors to observe that "consumers in general were charitable toward missing information, [appearing] not to hear when told something is missing."

■ One hundred seventeen students from a U.S. university were asked to assess four fictional doctors, with the one of primary interest to the researchers (Doctor X) having poor ratings on trustworthiness and conflict of interest that were either disclosed or not disclosed. Nondisclosure was presented either as 1) a completely blank space positioned in the same row where those ratings were indicated for other doctors; 2) that same space with the labels “trustworthiness” and “conflict of interest” indicated but no rating scores accompanying them; or 3) those labels similarly positioned accompanied by the phrase “declined to disclose.”

On a scale of 0 to 100, students indicated similarly low likelihoods of choosing Doctor X when there was either full disclosure of dismal scores (44.8 likelihood) or nondisclosure explained by “declined to disclose” (48.0). In striking contrast, they indicated much higher likelihoods of choosing Doctor X when the space where the ratings should have been was completely blank (69.5) and even when the words “trustworthiness” and “conflict of interest” appeared there with no scores provided (67.1).

In response to this the professors write: “Only when the absence of information was explicitly volitional with the words ‘declined to disclose’ did patients respond to it and infer it to be equivalent to full disclosure of poor information. The other nondisclosure conditions (Blank and Missing) were not interpreted negatively, and the provider of interest benefited from removing negative information from the profile.”

What should be done?

“Our results support the need for mandatory disclosures of relevant information,” the professors write in conclusion. Still, if mandatory disclosure is not feasible, they add, “it is not enough to know that information is missing but it must be underscored that it is deliberately withheld…[A]t the least use a standard nondisclosure template in which it is made explicit that the provider refused to provide information. Disclosure, therefore, may be effective not merely because of what is disclosed but also by alerting consumers to the decisions of those who have chosen not to disclose. The latter goal can be achieved by providing…the opportunity to disclose and informing [consumers] that this opportunity was provided and declined.”

The study, “Disclosure and the Dog That Didn’t Bark: Consumers Are Too Forgiving of Missing Information,” will be among thousands of research reports presented at the 2,150 sessions of the Academy of Management annual meeting in Atlanta from August 4th through 8th. Founded in 1936, the Academy of Management is the largest organization in the world devoted to management research and teaching. It has about 20,000 members in 128 countries. This year's annual meeting will draw some 12,000 scholars and practitioners for sessions on a host of subjects relating to business strategy, organizational behavior, corporate governance, entrepreneurship, careers, human resources, technology development, and other management-related topics.

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