The Psychology of Intuitive Forecasts of New Product Utility

When faced with the decision to adopt a product or service innovation consumers often need to forecast the long-run utility it will provide relative to incumbent goods. In this paper we review recent psychological research on the ability of people to forecast their own future preferences and discuss its implications for new product adoption decisions. We identify and review evidence for four distinct ways in which new product valuations may depart from those that would be prescribed by normative economic theory: projection biases, telescoping, emotional myopia, and loss framing. One of the implications of these biases is a predicted tendency for consumers to systematically overvalue and overbuy technology—at least under some conditions. We conclude with a discussion of the opportunities—and risks—these biases pose for managers seeking new ways to encourage consumer adoption of novel products and services.