The Availability Heuristic in Consumer and Financial Decisions:

Evidence from Consumer Reviews and Investment Patterns

Zekai Fei

Faculty of Humanities and Social Sciences, University of Nottingham Ningbo China, Ningbo, 315100, China

Keywords: Availability Heuristic, Consumer Behavior, Investment Behavior, Cognitive Bias.

Abstract: The availability heuristic is a cognitive shortcut when people rely on examples immediately coming to mind.

It is influential in consumer and financial behaviors. The research employs both theoretical analysis and

review on empirical studies. For consumer behavior, online reviews and visual cues are used in the experiment

to see how they will affect consumers’ choices. One experiment by Nazlan, Tanford, and Montgomery, used

manipulations of rating formats and visual cues in online reviews. Another experiment, by Thoma and

Williams, examined additional information in consumers’ brand choice. Financial behavior was examined

with individual and institutional investor data to identify how different types of investors trade in response to

market events. Results indicate that positive reviews with pictures significantly increase the odds of choosing

a product, while negative reviews disproportionately impact due to negativity bias. Additionally, brand effect

is a strong starting factor, but negative consumer reviews of a particular product significantly decrease the

odds of well-known brands being chosen. In finance, individual investors are more vulnerable to recent news,

trading volumes and extreme returns which leads to irrational decisions. Additionally, institutional investors

are more rational and data-driven in their approaches.

1 INTRODUCTION

The concept of availability was first described by

psychologists Amos Tversky and Daniel Kahneman

in 1973. Their seminal work defined availability as

one of mental shortcuts that involves immediate

examples that come into the mind when evaluating

any topic, concept, method, or decision (Tversky &.

Kahnemann, 1973). People tend to believe that an

event is more probable or frequently occurring simply

because instances of it are readily available in their

minds, probably due to their recency, emotional

impact, or vividness. This could result in a very

irrational decision, as many decisions are highly

influenced by judgment factors rather than objective

data.

Availability heuristic plays an important role in

real-life economic decisions, from consumer

behavior to financial choices. From this viewpoint,

the heuristic of availability influences both online

product choices and brand preference while

considering consumer behavior. Consumers simply

like those products and brands frequently

encountered in various media, advertisement, or

social networks. In the context of financial domains,

the heuristic of availability in shaping investment and

financial behavior relies on influences of investors

that tend to inflate probability assessment of

occurrences having recent or emotionally striking

experience. A sharp market fall can make investors

more risk-averse, while stories of high-return

investments can encourage risk-taking.

Understanding the availability heuristic is

important for developing more nuanced economic

theories and practices. Traditional economic models

assume rational decision-making based on complete

and accurate information (Wilkinson & Klaes, 2012).

However, the availability heuristic shows that human

decision-making is often subject to cognitive biases,

leading to systematic deviations from optimal

choices. By integrating the availability heuristic into

economic models, researchers and policymakers can

better predict and explain real-world behaviors,

yielding more effective policy interventions and

improved financial strategies.

Fei, Z.

The Availability Heuristic in Consumer and Financial Decisions: Evidence from Consumer Reviews and Investment Patterns.

DOI: 10.5220/0014149500004942

Paper published under CC license (CC BY-NC-ND 4.0)

In Proceedings of the 2nd International Conference on Applied Psychology and Marketing Management (APMM 2025), pages 621-627

ISBN: 978-989-758-791-7

621

2 INTRODUCTION TO THE

RESEARCH OBJECT

2.1 Application of Availability

Heuristic in Consumer Behavior

The availability heuristic plays a significant role in

consumer behavior, particularly in the context of

online product selection and brand preference. This

mental model leads people to believe that options are

more likely to occur if instances of them are readily

available in memory; this is biased toward recent and

vivid experiences. For example, a consumer who

recently read a news report about the product recall of

a particular brand is more likely to avoid products of

that brand, even if the recall refers to another line of

products, due to the increased salience of negative

information in the mind. Moreover, positive

experiences, for example, a friend enthusiastically

recommending the product which could make that

model more accessible in the consumer's mind and

thereby more likely to be chosen. Marketers also use

the availability heuristic by making their products

more available in media, advertisements, and social

networks. The more frequent a brand is exposed to a

consumer, the more it will be available in the

consumer's memory and therefore perceived as more

popular or of higher quality. When brand messages

are repeated in different channels, they provide a

cognitive anchor, and the brand becomes a more

favorable choice when the consumer is in a

purchasing decision phase.

2.2 Application of Availability

Heuristic in Investment and

Financial Behavior

Another domain where the availability heuristic

influences choice is in investment and financial

behavior. This heuristic could cause investors to

overestimate the probability of events that are more

memorable or recent, usually because of their

emotional impact or media coverage. For instance, an

investor who recently experienced a sharp market fall

might overestimate the chance of happening again

and thereby be much more conservative, or maybe not

invest at all (Baker & Wurgler, 2007). In contrast,

positive market events or stories about successful

high-return stocks could make such scenarios

outstanding in the minds of investors to take on riskier

investment options.

In the field of financial behavior, the availability

heuristic could also influence how people feel about

and handle risk. In cases where financial news

predominantly features a specific kind of investment,

such as cryptocurrency or real estate, investors may

feel that those options are more viable or safer due to

increased exposure, irrespective of the underlying

fundamentals or long-term prospects. This may lead

to herding behavior, where investors follow the

crowd based on the most readily available

information rather than on thorough analysis.

The heuristic can also influence the perception of

financial advice and recommendations. For example,

if an investor has a vivid experience with a financial

advisor who had made a correct prediction or a friend

who had made a good investment, he is likely to trust

and follow similar advice in the future. This could

lead to overreliance on anecdotal evidence rather than

objective data and diversified investment strategies.

3 IMPACT OF AVAILABILITY IN

CONSUMER BEHAVIOR

3.1 The Effect of Availability

Heuristics in Online Consumer

Reviews

The availability heuristic strongly influences

consumer behavior as a result of online reviews. In

cases where consumers happen upon numerous and

accessible positive reviews, these cues will increase

due to availability and improve perceived quality and

desirability. Consequently, this enables consumers to

develop favorable judgments and make a purchase

choice in favor of the product. Apart from that, few

but prominent negative reviews result in a

disproportionate effect on consumer perceptions and

eventually lead to a negative bias in product

judgments and lower purchase intentions. This

cognitive bias becomes more heightened with recent

emotionally charged feedback, which, of course, is

more memorable and salient in the consumers' mind.

Apart from positive or negative reviews, other factors

also make important contributions to consumers'

decisions, such as rating format or visual cues. These

factors together form an interaction effect which

would influence consumers’ behavior. The

interactive effect of rating formats and visual cues

enhances the salience of information, increasing

consumers’ reliance on availability heuristics by

making specific information more accessible. This

significantly influences consumer behavior, guiding

them toward particular choices.

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One experiment performed by Nazlan, Tanford,

and Montgomery (2018) could help to prove the

theory. The experiment was conducted online. Each

participant would see a review page featuring a photo

and information of a restaurant, followed by five

reviews. The format manipulation involved how the

ratings of each review were presented. Under the

numerical condition, the ratings were shown as

numbers ranging from 2.5 to 5, depending on the

sentiment condition. Under the star condition, the

ratings were displayed as yellow graphical stars, also

ranging from 2.5 to 5 stars. Meanwhile, visual cues

were manipulated by whether the target item’s photo

was attached to the reviews. To enhance the realism

of the scenario, internal photos of the restaurant were

used as visual virtual objects. In the no-photo

condition, no reviews had any attached photos. The

experimental results employed a series of 2×2×2

ANOVA (Analysis of Variance) to examine the main

effects of rating format, picture presence, as well as

their interaction effects on these the dependent

variables: menu item evaluation, choice likelihood,

and item selection. The results show that when

consumers see positive reviews with pictures, they

are more likely to choose the target object. This aligns

with the availability heuristic, as pictures provide

concrete and easily memorable visual information,

enhancing consumers’ memory and impression of

positive reviews, ultimately making them more

inclined to choose the dish. While the format of the

rating did not have a significant effect on the

likelihood of choosing. However, when the rating was

in numerical format, the presence of a picture

significantly increased the willingness to choose,

further supporting the availability heuristic. This is

because numerical ratings are more specific, and

when combined with pictures, they can more

effectively enhance consumers’ impression. The

negativity bias theory can also be proven by this

experiment. Negativity bias refers to the tendency for

negative information to be more easily noticed,

remembered, and to have a stronger impact compared

to positive information during the processes of

perception, evaluation, and memory (Baumeister et

al., 2001). In this experiment, the images in negative

reviews do not have a significant impact on choice

intention, which supports the negativity bias theory,

suggesting that consumers place greater importance

on negative information. Even though images can

enhance memory and impression, the strong influence

of negative information makes the role of images in

negative reviews insignificant. This is related to the

availability heuristic, as negative information is more

easily remembered and retrieved by consumers, thus

playing a more important role in their decision-

making.

The results showed that positive reviews with

pictures increased the likelihood of choosing the

target object, aligning with the availability heuristic.

Numerical ratings, when combined with pictures,

further enhanced this effect. However, images in

negative reviews had a negligible impact on choice

intention, supporting the negativity bias theory,

which posits that negative information is more salient

and influential. Despite the memory-enhancing role

of images, the interaction effect is overshadowed by

the stronger impact of negative information on

decision-making. Therefore, marketers could utilize

psychological attributes in the application of

consumer market strategies, as well as company

marketing elements and promotional strategies, to

influence consumer choices (Zhang, 2022).

3.2 The Effect of Availability on

Consumer Brand Choice

The availability heuristic also uses brand effects to

have an influence on consumer behavior (Kwun & Oh,

2004). When a brand is always available, it increases

consumer recognition and familiarity, which are

significant in the brand selection process. Besides, the

ease of access to a brand's products or services can

reduce the cognitive effort required for purchase

decisions, making the brand a more convenient and

attractive choice. In environments with multiple

brands competing, availability acts as both a barrier

to entry for new competitors and a major advantage

for established brands. It facilitates impulse buying

and repeat purchases, thereby fostering brand loyalty.

However, brand effect is not the only factor

influencing consumers; when negative evaluations

become overwhelmingly powerful, they can weaken

or even exert a negative impact on the brand effect of

well-known brands. In the real world, the interaction

effect should also be taken into consideration.

Negative reviews often stand out more than positive

ones because they tend to be more detailed and

emotionally charged. Therefore, consumers may

overestimate the likelihood of having a negative

experience with the brand because the negative

reviews are more readily available in their memory.

One of the studies, by Thoma and Williams (2013)

researched the role of the availability heuristic in

consumer brand choice. This study integrates

empirical data from a forced-choice task involving

pairs of consumer products where one brand is

famous and the other is obscure, exploring how

additional information in the form of consumer

The Availability Heuristic in Consumer and Financial Decisions: Evidence from Consumer Reviews and Investment Patterns

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ratings influences decision-making. 62 individuals

participated in this study (with 40 of them being

female). Participants were students and public of the

University of East London. The sample primarily

consists of young students who are still in school and

have a certain level of engagement with daily

expenses, making them suitable subjects for this

study. These results suggest that even though brand

recognition plays an important initial role in

consumer preference, negative ratings by consumers

may weaken the brand effect to a longer response

time and lower proportion of choices for a famous

brand. This research gives some interesting insights

into how brand effect interacts with extra information

in the choice made by consumers. Whereas brand

effect was a strong initial factor, the presence of

negative consumer ratings strongly lowered the

choice probability of the recognized brand.

Moreover, consumers appeared to include additional

information (for example, positive or negative

ratings) in their choice process, even when

recognition was a dominant factor. This conclusion is

further supported by the longer response times in the

negative condition. This indicates that respondents

are more introspective when conflicting information

is provided, taking a little more time to set the

negative ratings against their immediate recognition

of the brand.

Therefore, the interaction of the brand effect with

additional information is a very important application

of availability heuristic in consumer behavior.

However, the negative consumer ratings may be

balanced out. Since most negative consumer ratings

tend to stick in the consumer mind than the positive

ones as well, due to negativity bias. Thus, the

interaction of the brand effect with additional

information ultimately influences the consumer in

their final decision.

4 IMPACT OF AVAILABILITY IN

INVESTMENT AND

FINANCIAL BEHAVIOR

Human choice, influenced by the availability

heuristic in investment and financial behavior, may

further lead to inappropriate investment choices. The

behavioral biases in financial decision-making,

particularly those influenced by the availability

heuristic, can precipitate suboptimal investment

choices (Kliger &

Kudryavtsev, 2010).

The availability heuristic refers to the tendency of

individuals to overestimate the probability of

occurrences that are more prominent or recent in their

memory. On the one hand investors who have

recently experienced a large market decline are likely

to be particularly risk-averse and perceive the

probability of subsequent declines as larger than

would be suggested by historical market movements.

On the other hand, overconfidence about future

returns and underestimation of risks will make

investors overconfident if they have enjoyed relative

stability or growth, also resulting in inefficient

resource allocation and overreaction to volatility.

Apart from that, social media are imbued with an

extraordinary quantity of coverage regarding unusual

market events, which thereby skews investor

perception. While negative market news makes up

only a minor fraction of the total economic data, it is

usually more memorable and therefore more

accessible in investors' minds. The availability

heuristic also provides an explanation for the

formation and collapse of investment bubbles. This

can be seen in the way information on specific assets

or sectors spreads and becomes popular, thus

reinforcing the positive beliefs of an increasing

number of investors who, in turn, invest more. On the

downside, negative news spreads like a wildfire,

leading to panic selling and sharp declines in prices.

These dynamics are further exaggerated by the

availability heuristic, where investor decisions are

disproportionately based on information that is most

immediate and salient to them.

One experiment by Barber and Odean (2008)

shows that attention-grabbing events affect the

buying and selling decisions of individual and

institutional investors. The study employed four

different datasets, which were important in capturing

a wide range of investment behaviors from

unsophisticated individual investors to sophisticated

professionals. It isolated news reports, abnormal

trading volumes, and extreme returns as the most

likely types of events to draw investors' attention.

Such measures are considered proxies for investor

attention in this study because the direct measurement

of attention is extremely impractical. The entire

experiment can be divided into four parts. Firstly, the

preparation of the data, which deals with acquiring

and cleaning the trading data for individual and

professional investors. Secondly, data classification,

where stocks are classified into different deciles and

vigintiles based on trading volume and stock price

changes. Thirdly, computation of the Buy-Sell

Imbalance (BSI). This is an important metric in the

study. When BSI is greater than 0, it means that

investors tend to buy the stock, and the higher the

value, the stronger the buying intention. On the

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contrary, if BSI is less than 0, it indicates that

investors tend to sell the stock, and the lower the

value, the stronger the selling tendency. The last step

is the comparison of data; by comparing the BSI of

individual investors and professional investors in

different groups, several conclusions can be obtained

from the experiment.

The outcome of the experiment can be divided

into three parts, in which each part displays the

buying and selling behavior of both individual and

institutional investors. First, it is the classification

according to the trading volume. From the investor's

perspective, the BSI shows a monotonic increase with

increased stock trading volume. That means stocks

traded with higher trading volumes have a higher BSI,

indicative of a stronger buy sentiment. For example,

the BSI of the bottom decile stocks in terms of trading

volume is negative, at -18.15% and -16.28%,

indicating a slight advantage on sell; but for the top

vigintile, BSI shows a positive value, +29.5% or

+17.67%, which means a large buy advantage.

However, for institutional investors, the BSI is

positive for the lowest trading volume stocks and

gradually decreases as trading volume increases.

Overall, these institutional investors show a tendency

that is opposite to that of individual investors: their

BSI is higher on low-trading-volume days compared

to high-trading-volume days. Secondly, the

classification by returns. Individual investors show

high attention-driven trading behavior, especially

when the stock performed extremely the previous

day. They demonstrate a high purchasing propensity

for those stocks that had a poorer performance during

the previous day: 29.4% of BSI sharply dropped to

1.8% for the averagely performed stocks and once

again increased up to 24% for the best. The individual

investor reacts more to high volatility in the markets,

especially as regards buying the worst performing

stocks, while the evidence obtained for the different

patterns of behavior for institutional investors proves

to be different. For momentum managers (managers

who buy assets with strong recent price performance

and sell those with poor performance), they have a

tendency to sell the worst performing stocks and to

buy the best performing ones. For value managers

(managers who seek to identify and invest in

undervalued assets, believing that these investments

will eventually return to their intrinsic value), the

opposite is true: They tend to buy the worst

performing stocks and to sell the best performing

ones. Diversified managers take a more neutral view.

Therefore, their investment strategies match the

extremely good or bad return rather than blindly

following. Lastly is the news categorization. Stocks

that have news attract investors more as it has a higher

net buying ratio as compared to without news stocks.

Large discount brokerages and large retail brokerages

show identical trends. Namely, 2.70% of BSI in large

discount brokerages stocks do not report news,

whereas 9.35% for the with news stocks. For large

retail brokerages, the BSI for no-news stocks is -

1.84% while that for news stocks is 16.17%.

In summary, the experiment provides substantial

evidence of the availability heuristic in financial

investment decisions. Individual investors are more

susceptible to being influenced by easily available

information, such as high trading volumes and recent

news, which can lead to emotional and often

excessive reactions. Institutional investors,

particularly those with specialized investment

strategies, exhibit a more rational and data-driven

approach, indicating that their decisions are less

swayed by the availability of market attention. This

distinction offers valuable insights into the different

behavioral patterns observed in the market,

highlighting the importance of information

availability and its differential impact on various

types of investors. Relevant investment experience or

education can help investors to some extent avoid the

influence of availability heuristic.

From this analysis, abnormal trading volume

appears to be the best indicator of attention, followed

by returns. News indicator seems to be the least

informative metric indicating attention. In

conclusion, individual investors might be affected by

the availability heuristic in determining the stocks to

sell and buy. Therefore, profit opportunities are

possible for professional investors by adapting

trading strategies to benefit from such situations in

the short run. Availability heuristic could encourage

irrational exuberance and market bubbles. Irrational

exuberance refers to speculative manias or excessive

optimism in financial markets (1997). The

availability heuristic fuels this exuberance by making

positive outcomes seem more likely and negative

outcomes seem less likely. The more news about an

asset spread, including stories of success and

increasing wealth, the more investors will bid its price

up above intrinsic value. This is the beginning of a

bubble-a situation where the market price of an asset

is way out of alignment with its fundamental value.

Eventually, the bubble becomes unsustainable, and it

bursts. In addition, when negative information starts

to spread or a few investors start selling, this mania

can easily turn into a rapid price decline. The same

availability heuristic that initially produced the

bubble reinforces negative market sentiment now,

and a market crash ensues.

The Availability Heuristic in Consumer and Financial Decisions: Evidence from Consumer Reviews and Investment Patterns

625

5 DISCUSSION AND

SUGGESTION

5.1 Holistic Conclusion

The availability heuristic heavily influences

consumer behavior and financial decision-making;

thus, understanding and addressing this cognitive bias

is paramount. In consumer behavior, the availability

heuristic plays a major role in how consumers make

choices, especially in online environments. Positive

and vivid experiences tend to be associated with

products to which consumers are more likely to be

attracted, and which are more memorable in their

minds. Additionally, availability heuristic has a

stronger and more lasting impact due to the negativity

bias. The study’s findings on the effect of availability

heuristic in online consumer reviews are particularly

noteworthy. Positive reviews, especially with

pictures, significantly raise the chances of a consumer

choosing a product and adding numerical ratings

could further increases such likelihood. Negative

reviews, even with the support of images, have little

significant effect on choice intention. That means,

although consumers have been more influenced by

positive visual and numerical information, the

negativity bias appears to have taken an upper hand

over their choice pattern. In the financial domain,

availability heuristic also impacts individuals'

behaviors. Individual investors often make decisions

based on readily available information, such as

volumes of trade in the stock or recent news reports

of companies, with most reactions very emotional and

excessive. By contrast, institutional investors,

particularly those with specialized investment

strategies, would base more of their decisions on

comprehensive data and rational analysis; therefore,

their decisions would be less prone to market

attention and more anchored in the dynamics of long-

term markets.

5.2 Suggestions and Implication

5.2.1 Suggestions for Consumers

While positive reviews and images are often

convincing, consumers should be exposed to a wider

range of data, such as negative reviews and objective

product information. In this way, consumers will be

better prepared to make a more informed decision that

is more balanced and less susceptible to the

availability heuristic and negativity bias. While

making a choice, diversified opinions play an equally

critical role in helping make a decision. A friend's

recommendation or just one online review is not

sufficient for making a choice; rather, one needs to

consult diversified opinions and obtain information

from a range of sources before a purchase. The

diversified opinions would involve reading multiple

reviews, checking expert opinions, and comparing

different products based on price and features.

5.2.2 Suggestions for Investors

Seeking comprehensive information is a vital step to

avoid availability heuristic. Relying solely on recent

or emotionally charged information can lead to biased

and suboptimal decisions. Investors should seek out

and consider a comprehensive range of data,

including historical market trends, financial

statements, and expert analysis. This holistic

approach can help in making more informed and

rational investment choices. Besides, professional

financial advisors and institutional investors often

have more robust and data-driven investment

strategies. Investors should consider seeking advice

from these professionals to gain a more balanced and

informed perspective. This can help in making

decisions that are less influenced by cognitive biases

and more aligned with long-term financial goals.

6 CONCLUSION

In conclusion, this study essentially investigated that

the availability heuristic was a strong determinant of

consumer choice, especially in online domain.

Addition of visual cues to positive reviews strongly

enhances choice probability. Moreover, negative

reviews are more powerful due to negativity bias.

Brand recognition increases initial consumer

preference but is diminished when negative consumer

ratings occur. In financial and investment market,

individual investors are much more sensitive to recent

news and trading volume, which can drive them into

making emotional and sometimes irrational

decisions, whereas institutional investors are more

rational and data-driven in their approaches.

The consumers can decrease this bias by finding

their information from diversified sources and

checking several reviews. Additionally, investors

should look for comprehensive data and professional

advice to avoid reliance on recent or emotionally

charged information. In light of this understanding,

the availability heuristic is highly instrumental in

building subtle economic theory and practice. This

paper calls for a need to begin thinking of cognitive

biases of both consumers and investors on the part of

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policymakers and marketers. By such investigation,

better strategies could have been formulated that

might guide the choices of consumers toward the

stabilization of financial markets into a more rational

and informed environment of decision-making.

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