Consumer confusion of percent differences

The present research investigated consumers' intuitions about percent differences. We found that the perceived difference between two quantities compared on a percent scale varies as a function of the target of the comparison. The subjective price difference between a $1500 and a $1000 moped, for instance, increased when the former was described as 50% more than the latter than when the latter was described as 33% less than the former (Experiment 1). This effect (1) is limited to comparisons made on a ratio scale, (2) varies as a function of the percent difference between the two quantities, and (3) applies not only to price but also to other quantifiable attributes (Experiments 2-4). Finally, Experiment 5 found that the bias was reduced (but not eliminated) with financial incentives for accuracy and persisted even among highly numerate individuals. Discussion focuses on the source and the implications of this bias.