Question

What is the difference between compensatory decision rules and noncompensatory decision rules as they relate to choosing between different brands?

Answer 1

When consumers evaluate each and every brand when there are more alternatives for a product and trade off one characteristics for another where good characteristics outnumber than the bad characteristics, it is called as compensatory decision rules. While choosing a product, there are many attributes like prices, quality, benefits, risks of using the product which are evaluated thoroughly and the product which has the maximum utility is selected. Here the higher or equal value of one attribute compensate the negative attribute values. For eg. Most people prefer to pay higher rents for houses which are located in the CBD area due to its proximity and easy availability to markets, offices, businesses, schools, transportation etc. The same compensatory decision rule is applied while choosing between different brands and zero in the best brand which provides the maximum utility of a product.

One the other hand, noncompensatory decision rule is totally opposite to the compensatory decision rule where the compensation of negative attributes by the positive attributes are totally rejected. So while choosing brands, consumers take noncompensatory decision when all the relevant informations associated with the brand or product are not collected and fail to evaluate all the related attributes. For eg. while buying flight tickets, people always search for cheap tickets irrespective of the filghts' long duration, number of stoppage etc.