Always selling
Enjoy it again: Repeat experiences are less repetitive than people think
Ed O'Brien
Journal of Personality and Social Psychology, April 2019, Pages 519-540
Abstract:
What would it be like to revisit a museum, restaurant, or city you just visited? To rewatch a movie you just watched? To replay a game you just played? People often have opportunities to repeat hedonic activities. Seven studies (total N = 3,356) suggest that such opportunities may be undervalued: Many repeat experiences are not as dull as they appear. Studies 1–3 documented the basic effect. All participants first completed a real-world activity once in full (Study 1, museum exhibit; Study 2, movie; Study 3, video game). Then, some predicted their reactions to repeating it whereas others actually repeated it. Predictors underestimated Experiencers’ enjoyment, even when experienced enjoyment indeed declined. Studies 4 and 5 compared mechanisms: neglecting the pleasurable byproduct of continued exposure to the same content (e.g., fluency) versus neglecting the new content that manifests by virtue of continued exposure (e.g., discovery), both of which might dilute uniform dullness. We found stronger support for the latter: The misprediction was moderated by stimulus complexity (Studies 4 and 5) and mediated by the amount of novelty discovered within the stimulus (Study 5), holding exposure constant. Doing something once may engender an inflated sense that one has now seen “it,” leaving people naïve to the missed nuances remaining to enjoy. Studies 6 and 7 highlighted consequences: Participants incurred costs to avoid repeats so to maximize enjoyment, in specific contexts for which repetition would have been as enjoyable (Study 6) or more enjoyable (Study 7) as the provided novel alternative. These findings warrant a new look at traditional assumptions about hedonic adaptation and novelty preferences. Repetition too could add an unforeseen spice to life.
Mitigating malicious envy: Why successful individuals should reveal their failures
Alison Wood Brooks et al.
Journal of Experimental Psychology: General, forthcoming
Abstract:
People often feel malicious envy, a destructive interpersonal emotion, when they compare themselves to successful peers. Across 3 online experiments and a field experiment of entrepreneurs, we identify an interpersonal strategy that can mitigate feelings of malicious envy in observers: revealing one’s failures. Despite a general reluctance to reveal one’s failures — as they are happening and after they have occurred — across four experiments, we find that revealing both successes and failures encountered on the path to success (compared to revealing only successes) decreases observers’ malicious envy. This effect holds regardless of the discloser’s status and cannot be explained by a decrease in perceived status of the individual. Then, in a field experiment at an entrepreneurial pitch competition, where pride displays are common and stakes are high, we find suggestive evidence that learning about the failures of a successful entrepreneur decreases observers’ malicious envy while increasing their benign envy and decreasing their perceptions of the entrepreneur’s hubristic pride (i.e., arrogance) while increasing their perceptions of the entrepreneur’s authentic pride (i.e., confidence). These findings align with previous work on the social-functional relation of envy and pride. Taken together, our results highlight how revealing failures encountered on the way to success can be a counterintuitive yet effective interpersonal emotion regulation strategy.
Twice-told tales: Self-repetition decreases observer assessments of performer authenticity
Rachel Gershon & Rosanna Smith
Journal of Personality and Social Psychology, forthcoming
Abstract:
People often engage in self-repetition — repeating the same story, joke, or presentation across different audiences. While behaving consistently has generally been found to enhance perceptions of authenticity, 10 studies demonstrate that performers who are revealed to be self-repeating are perceived as less authentic. We find convergent evidence that this effect is driven by observers’ implicit assumption that social interactions are unique. Self-repetitions violate this assumption, leading observers to judge performers as inauthentic because they are thought to be falsely presenting their performance as unique when it is not. We demonstrate this effect across multiple contexts (politics, entrepreneurship, tour guiding, and comedy), finding that observer awareness of self-repetition decreases perceived authenticity even in situations in which it is normative to repeat a performance and in which repetition is required. The decrease in authenticity is eliminated only when performers overtly acknowledge self-repetition, as performers are no longer viewed as falsely presenting themselves. Moreover, performers who fail to acknowledge their self-repetition are penalized similarly to those who explicitly lie that the performance is unique — an unacknowledged self-repetition is thus seen as a lie by omission. Finally, we recorded repeated job interview responses and found that observers who were unaware of the self-repetition could not discern tangible differences between unrepeated and repeated responses. However, when observers believed that they were viewing a self-repetition, they judged the interviewees as less authentic. Together, our findings provide insight into how people assess the authenticity of self-presentational behaviors and the implicit assumptions that influence social judgments.
Toward an Understanding of the Economics of Apologies: Evidence from a Large-Scale Natural Field Experiment
Basil Halperin et al.
NBER Working Paper, March 2019
Abstract:
We use a theory of apologies to design a nationwide field experiment involving 1.5 million Uber ridesharing consumers who experienced late rides. Several insights emerge from our field experiment. First, apologies are not a panacea: the efficacy of an apology and whether it may backfire depend on how the apology is made. Second, across treatments, money speaks louder than words – the best form of apology is to include a coupon for a future trip. Third, in some cases sending an apology is worse than sending nothing at all, particularly for repeated apologies. For firms, caveat venditor should be the rule when considering apologies.
Are passengers compensated for incurring an airport layover? Estimating the value of layover time in the U.S. airline industry
Alexander Luttmann
Economics of Transportation, March 2019, Pages 1-13
Abstract:
American, Delta, and United have organized their operations into extensive hub-and-spoke networks that typically require passengers originating and concluding travel in non-hub cities to board a connecting flight at a hub en route to the final destination. From the passenger perspective, layovers are detrimental since the addition to total travel time relative to a nonstop itinerary is a cost incurred by the passenger. An airline is able to reduce a passenger's layover time by narrowing the gap between flights at the connecting airport. However, narrowing this flight gap has the adverse effect of increasing airport congestion. Taking these perspectives into account, it is clear that layover time influences a prospective passenger's purchasing decision and an airline's flight scheduling decision. Using published fare and itinerary data from Google Flights, this paper provides insight into both decisions by providing empirical estimates on the value of layover time in the U.S. airline industry. This paper finds that passengers are compensated with a fare that is $42.74-$47.60 cheaper per hour of layover time. Of the three dominant legacy carriers, United passengers are found to be compensated at an even higher rate of $61.89 per hour.
Managing Negative Celebrity Endorser Publicity: How Announcements of Firm (Non)Responses Affect Stock Returns
Stefan Hock & Sascha Raithel
Management Science, forthcoming
Abstract:
Celebrity endorsers can cause negative publicity that can spill over to the endorsed brand. However, little is known about the economic effects of firm reactions to these events. This study fills this gap and estimates how announcements of firms’ reactions (yes versus no), timing (slow versus fast), and type (maintain/suspend versus no reaction) affect daily abnormal stock returns (ARs) following negative publicity. Using 128 events of negative endorser publicity between 1988 and 2016 affecting firms in 230 cases, this study offers new and economically relevant insights. The most surprising finding is that firms can gain value depending on their response. Announcements of firms’ reactions positively affect ARs, especially if they occur quickly after negative publicity surfaces. The analyses reveal that fast (slow) announcements of firms’ reactions increase (decrease) firm value by 2.10% (−1.88%) over the next four trading weeks. Results also show that issuing statements suspending or maintaining the endorser both yield more positive ARs than not reacting at all. Further analyses identify conditions under which the stock market rewards maintaining or suspending an endorser. Firms have more positive ARs when they (1) suspend higher-blame endorsers, (2) suspend endorsers whose negative publicity is related to their occupation, (3) maintain endorsers with a high product fit, and (4) do not suspend apologetic endorsers. This study discusses implications for theory and practice and provides a strong empirical foundation for understanding the consequences of firm reaction announcements to negative celebrity endorser publicity.
Consumer Response to Chapter 11 Bankruptcy: Negative Demand Spillover to Competitors
Cem Ozturk, Pradeep Chintagunta & Sriram Venkataraman
Marketing Science, forthcoming
Abstract:
When financially distressed firms have overwhelming debts, a prominent option for survival is to file for Chapter 11 bankruptcy protection. We empirically study the effect of Chrysler’s Chapter 11 bankruptcy filing on the quantity sold by its competitors in the U.S. auto industry. The demand for competitors could increase because they may benefit from the distress of the bankrupt firm (competitive effect). By contrast, competitors could experience lower sales if the bankruptcy increases consumer uncertainty about their own viability (contagion effect). A challenge to measuring the impact of bankruptcies is the coincident decline in economic conditions stemming from the Great Recession and the potential effect of the “cash for clunkers” program (among other confounding factors). To identify the effect of the bankruptcy filing, we employ a regression-discontinuity-in-time design based on a temporal discontinuity in treatment (i.e., bankruptcy filing), along with an extensive set of control variables. Such a design is facilitated by a unique data set at the dealer–model–day level that allows us to compare changes in unit sales in close temporal vicinity of the filing. We find that unit sales for an average competitor decrease by 28% following Chrysler’s bankruptcy filing. Several types of evidence suggest that this negative demand spillover effect is driven by a heightened consumer uncertainty about the viability of the bankrupt firm’s rivals. For example, we show that the sales of competitors’ vehicles that compete within the same segments as the bankrupt firm’s vehicles or that provide lower value for money are affected more negatively in response to the Chrysler filing. We also observe more web search activity for Chrysler’s competitors after the filing. Our findings are robust to different estimation strategies (global versus local), different functional forms, different estimation windows, the inclusion of various controls (e.g., “cash for clunkers,” incentives, advertising, inventory, recalls, price, and consumer confidence), the donut regression discontinuity approach, a potential serial correlation issue, a falsification exercise, and the inclusion of differential trends at various levels. Our study aims to inform policymakers and managers about unintended short-term demand consequences of Chapter 11 bankruptcy.
Digitization and the Demand for Physical Works: Evidence from the Google Books Project
Abhishek Nagaraj & Imke Reimers
University of California Working Paper, February 2019
Abstract:
The age of digitization promised to deliver a centralized, digital repository of all knowledge. Copyright holders, however, concerned about reduced demand for physical works, have blocked the realization of this vision. We investigate the effect of digitization on demand for physical works using novel data tracking the timing of the digitization of individual books from Harvard University’s libraries through the Google Books project. Digitization hurt loans within Harvard but increased sales of physical editions by about 35%, especially for less popular works. Rather than cannibalizing demand, digitization might benefit copyright holders through increased discovery of less popular works.
Unexpected-Framing Effect: Impact of Framing a Product Benefit as Unexpected on Product Desire
Monica Wadhwa et al.
Journal of Consumer Research, forthcoming
Abstract:
Product tests are a common feature before any product launch. During such product tests, marketers might discover that the product can deliver additional unintended benefits to the users. Should marketers communicate such unexpectedly found benefits to their potential customers as an unexpectedly discovered benefit or as an intended benefit? Across six experiments, including a field experiment, the current research shows that framing a product benefit as unexpected increases desire for the product, when consumers have a heightened motivation to seek rewards. However, framing an undesirable product feature (e.g., a side effect) as unexpected can negatively impact product desirability for consumers, who have a heightened motivation to avoid losses. Finally, highlighting another managerially important boundary condition, our findings show that the unexpected framing effect is attenuated when the benefit framed as unexpected is incongruent with the product category. Theoretical and managerial implications of unexpected framing are discussed.
The Deadweight Loss of Social Recognition
Luigi Butera et al.
NBER Working Paper, March 2019
Abstract:
A growing body of empirical work shows that social recognition of individuals' behavior can meaningfully influence individuals’ choices. This paper studies whether social recognition is a socially efficient lever for influencing individuals’ choices. Because social recognition generates utility from esteem to some but disutility from shame to others, it can be either positive-sum, zero-sum, or negative-sum. This depends on whether the social recognition utility function is convex, linear, or concave, respectively. We develop a new revealed preferences methodology to investigate this question, which we deploy in a field experiment on promoting attendance to the YMCA of the Triangle Area. We find that social recognition increases YMCA attendance by 17-23% over a one-month period in our experiment, and our estimated structural models predict that it would increase attendance by 19-23% if it were applied to the whole YMCA of the Triangle Area population. However, we find that the social recognition utility function is significantly concave and thus generates deadweight loss. If our social recognition intervention were applied to the whole YMCA of the Triangle Area population, we estimate that it would generate deadweight loss of $1.23-$2.15 per dollar of behaviorally-equivalent financial incentives.
Discount Pricing
Mark Armstrong & Yongmin Chen
Economic Inquiry, forthcoming
Abstract:
We investigate the practice of framing a price as a discount from an earlier price, with information such as “was $200, now $100.” We discuss two reasons why a discounted price — rather than a merely low price — can make a consumer more willing to purchase. First, a high initial price can indicate the seller has chosen to supply a high‐quality product. Second, when a seller with limited stock runs a clearance sale, later consumers infer that unsold stock has higher expected quality when its initial price was higher. We also suggest a behavioral explanation, which is that consumers with reference‐dependence preferences are more likely to buy if they perceive the price as a bargain relative to the earlier price. Discount pricing is therefore an effective marketing technique, and a seller may wish to deceive potential customers by offering a false discount. The welfare effects of regulation to prevent fictitious pricing are subtle, with potential unintended consequences, and depend on whether consumers are sophisticated or naive.
Background Noise? TV Advertising Affects Real Time Investor Behavior
Jura Liaukonyte & Alminas Zaldokas
Cornell University Working Paper, February 2019
Abstract:
Using minute-by-minute television advertising data covering approximately 326,000 ads, 301 firms, and $20 billion in ad spending, we study the real-time effects of TV advertising on investor search for online financial information and subsequent trading activity. Our identification strategy exploits the fact that viewers in different U.S. time zones are exposed to the same programming and national advertising at different times, allowing us to control for contemporaneous confounding events. We find that an average TV ad leads to a 3% increase in SEC EDGAR queries and an 8% increase in Google searches for financial information within 15 minutes of the airing of that ad. Such advertising effects spill over through horizontal and vertical product market links to financial information searches on closest rivals and suppliers. The ad-induced queries on the advertiser and its key rival lead to higher trading volumes of their respective stocks. For large advertisers, around 0.8% of daily trading volume can directly be attributed to advertising. This suggests that advertising, originally intended for consumers, has a sizable effect on financial markets.
Crowd wisdom enhanced by costly signaling in a virtual rating system
Ofer Tchernichovski et al.
Proceedings of the National Academy of Sciences, forthcoming
Abstract:
Costly signaling theory was developed in both economics and biology and has been used to explain a wide range of phenomena. However, the theory’s prediction that signal cost can enforce information quality in the design of new communication systems has never been put to an empirical test. Here we show that imposing time costs on reporting extreme scores can improve crowd wisdom in a previously cost-free rating system. We developed an online game where individuals interacted repeatedly with simulated services and rated them for satisfaction. We associated ratings with differential time costs by endowing the graphical user interface that solicited ratings from the users with “physics,” including an initial (default) slider position and friction. When ratings were not associated with differential cost (all scores from 0 to 100 could be given by an equally low-cost click on the screen), scores correlated only weakly with objective service quality. However, introducing differential time costs, proportional to the deviation from the mean score, improved correlations between subjective rating scores and objective service performance and lowered the sample size required for obtaining reliable, averaged crowd estimates. Boosting time costs for reporting extreme scores further facilitated the detection of top performances. Thus, human collective online behavior, which is typically cost-free, can be made more informative by applying costly signaling via the virtual physics of rating devices.
New Product Preannouncement: Phantom Products and the Osborne Effect
Ram Rao & Ozge Turut
Management Science, forthcoming
Abstract:
The mere preannouncement of a new product can affect consumer choice, thus complicating preannouncement strategy. This is because a preannounced product that is unavailable immediately can still be one of the alternatives in a consumer’s mind at the time of choice. Such unavailable products, also known as phantom products, influence the reference point that consumers compare alternatives to when making a choice, as has been widely demonstrated in experimental studies. Thus, in addition to encouraging consumers to postpone purchase in favor of a future product, preannouncement also changes their preference for the currently available products when consumers do not prefer to postpone. In this paper we explore preannouncement strategy by analyzing a model that incorporates the effect of new product preannouncement (NPP) on consumer preferences and compare the results with a benchmark case in which consumer preferences across the existing products are not influenced by preannouncement. We find that when we take into account the effect of NPP on consumer preferences across the existing products, although postponement of purchase by some consumers remains beneficial, the preference for the current product offering with a lower quality can suffer so much that the significant lowering of current profits is not offset by future gains. Thus, preannouncement may no longer be the optimal strategy for the firm with a lower-quality product, which in turn explains the “Osborne effect.” Our results also challenge the conventional wisdom in new product preannouncement literature.
How decision context changes the balance between cost and benefit increasing charitable donations
Marta Caserotti, Enrico Rubaltelli & Paul Slovic
Judgment and Decision Making, March 2019, Pages 187–198
Abstract:
Recent research on charitable donations shows that donors evaluate both the impact of helping and its cost. We asked whether these evaluations were affected by the context of alternative charitable causes. We found that presenting two donation appeals in joint evaluation, as compared to separate evaluation, increased the perceived benefit of the cause ranked as more important (Study 1), and decreased its perceived cost, regardless of the relative actual costs (Study 2). Finally, we try to reconcile an explanation based on perceived cost and benefit with previous work on charitable donations.