Should Consumers Use the Halo to Form Product Evaluations? A Theoretical and Experimental Study

In purchase situations where attribute information is either missing or difficult to judge, a well-known “rule of thumb” consumers use to form evaluations is the halo effect. The psychology literature has widely considered the halo to reflect consumers’ inability to discriminate between different attributes and have therefore labeled it as the “halo error” or the “logical error.” The objective of this paper is to offer a rationale for the halo effect. We use a decision-theory framework to show that the halo is consistent with the goal of minimizing estimation risk. Contrary to conventional wisdom we demonstrate that a decision using the halo allows consumers to make better evaluations of an object as compared to not using the halo heuristic. Therefore, using the halo results in utility maximization and is indicative of rational behavior. We draw some implications for advertising strategies and perform experimental tests.