Deal or no deal
The Bright Side of Having an Enemy
Mushegh Harutyunyan & Baojun Jiang
Journal of Marketing Research, forthcoming
Abstract:
Conventional wisdom suggests that more intense competition will lower firms’ profits. The authors show that this may not hold in a channel setting with exclusive retailers. They find that a manufacturer and its retailer can both become worse off if their competing manufacturer and retailer with quality-differentiated products exit the market. Put differently, in a channel setting, more intense competition can be all-win for the manufacturer, the retailer, and the consumers. Interestingly, a high-quality manufacturer can benefit from an increase in its competitor’s perceived quality (e.g., due to favorable product reviews from consumers or third-party rating agencies). In other words, a manufacturer may prefer a strong rather than a weak enemy, and the manufacturer can have an incentive to help its competitor improve product quality or remain in the market. Furthermore, the authors show that a multiproduct monopolist manufacturer with an exclusive retailer may make higher profits by spinning off a product into a competing manufacturer that has its own retail channel, even without accounting for any proceeds from the spinoff.
Does Piracy Create Online Word of Mouth? An Empirical Analysis in the Movie Industry
Shijie Lu, Xin (Shane) Wang & Neil Bendle
Management Science, forthcoming
Abstract:
Anecdotal evidence suggests that counterfeiting/piracy can help create online word of mouth (WOM) and through this boost demand, but how powerful is such WOM? To answer this question, we conduct a descriptive study with some attempts to establish near causality. We estimate the impact of piracy on WOM and ultimately revenue by applying a panel data method to all movies widely released in the United States from 2015 to 2017. In identifying the effects of piracy we make inventive use of Russian piracy data to construct instrument variables for piracy in the United States. This is possible because the key piracy site, The Pirate Bay, has been blocked in Russia since 2015. We find movies with prerelease piracy are associated with lower revenues despite the WOM effect. Critically, however, we show a positive correlation between postrelease piracy and WOM volume, and we extend the field by finding that the presence of postrelease piracy is associated with an approximately 3.0% increase in box office revenue. We also note the impact of a raid by the Swedish Police that temporarily took down The Pirate Bay website in December 2014. The period when the site was down experienced a decline in WOM volume and revenues, consistent with the effect of lower postrelease piracy predicted by our models. Our findings suggest approaches to target scarce antipiracy resources, such as focusing on tackling damaging prerelease piracy.
In Mobile We Trust: The Effects of Mobile Versus Nonmobile Reviews on Consumer Purchase Intentions
Lauren Grewal & Andrew Stephen
Journal of Marketing Research, forthcoming
Abstract:
In the context of user-generated content (UGC), mobile devices have made it easier for consumers to review products and services in a timely manner. In practice, some UGC sites indicate if a review was posted from a mobile device. For example, TripAdvisor uses a “via mobile” label to denote reviews from mobile devices. However, the extent to which such information affects consumers is unknown. To address this gap, the authors use TripAdvisor data and five experiments to examine how mobile devices influence consumers’ perceptions of online reviews and their purchase intentions. They find that knowing a review was posted from a mobile device can lead consumers to have higher purchase intentions. Interestingly, this is due to a process in which consumers assume mobile reviews are more physically effortful to craft and subsequently equate this greater perceived effort with the credibility of the review.
On the naturalistic relationship between mood and entertainment choice
Hal Hershfield & Adam Alter
Journal of Experimental Psychology: Applied, forthcoming
Abstract:
People are sensitive to economic conditions, buying more during booms and less during recessions. Across seven studies, the present research examines whether the nature of their purchases also changes as diffuse, prevailing mood states shift from positive during boom periods to negative during recession periods. Existing research shows that people primarily strive to improve negative moods, whereas they are willing to encounter threatening information when they experience positive mood states. Consistent with these patterns, we find that people showed a relative preference for lighter cultural products during relatively negative economic times, and, to a lesser extent, were slightly more open to heavier cultural products during boom periods. According to archival dataset analyses, these effects persisted across comedic cartoons, music, books, and films. In 2 lab experiments, writing about boom versus recession periods changed preferences for lighter versus heavier cultural products.
When weak sanctioning systems work: Evidence from auto insurance industry fraud investigations
Danielle Warren & Maurice Schweitzer
Organizational Behavior and Human Decision Processes, forthcoming
Abstract:
To deter auto insurance fraud, insurance companies and law enforcement agencies investigate and prosecute suspicious claims. We describe this sanctioning system and perceptions of this system by integrating unique datasets: insurance company records, interviews with insurance fraud investigators, state law enforcement data (CA, NY), and surveys of automotive insurance customers. We identify organizational constraints, such as public relations concerns, that limit the effectiveness of the formal sanctioning system (fewer than 1% of claims that are flagged as suspicious are ever prosecuted for fraud). We also identify psychological factors that deter consumers from committing fraud; consumers over-estimate the probability of detection, over-estimate the consequences of prosecution, are sensitive to social sanctions (e.g., negative publicity), and anticipate high emotional costs, such as shame and embarrassment, that make the prospect of committing fraud highly aversive. That is, psychological factors substantially deter fraud even though the economic sanctions are weak. Our findings integrate scholarship on sanctioning systems (Tenbrunsel & Messick, 1991) and highlight the role of organizational constraints and psychological factors in deterring fraud.
Role of Ambient Temperature in Influencing Willingness to Pay in Auctions and Negotiations
Jayati Sinha & Rajesh Bagchi
Journal of Marketing, July 2019, Pages 121-138
Abstract:
While temperature’s effects on human physiology have been well studied, its effects in decision-making contexts are still relatively unknown. The authors investigate the role of ambient temperature in one important decision-making context: consumer purchase. More specifically, they examine how ambient temperature influences consumers’ willingness to pay in different kinds of purchase contexts, such as in auctions and in negotiations. The authors show that whereas higher (vs. moderate) temperatures elicit higher willingness to pay in auctions, they lead to a lower willingness to pay in negotiations, and temperature-induced discomfort and aggression underlie these effects. The authors also study the effects of lower temperatures and extend these findings to more general competitive settings. They report findings from six studies and discuss theoretical, managerial, and policy implications.
Making the Wait Worthwhile: Experiments on the Effect of Queueing on Consumption
Sezer Ülkü, Chris Hydock & Shiliang Cui
Management Science, forthcoming
Abstract:
This paper investigates the relationship between waiting time and subsequent purchase decisions. The prior literature assumes that purchase decisions are independent from the waiting time. By contrast, we find that when people spend a longer time waiting in a line, they tend to consume more. We identify mental accounting for sunk costs as the underlying mechanism that drives this behavior; a larger purchase allows customers to offset the long wait suffered. Finally, we explore the effect of managerial practices commonly employed by firms to improve customers’ waiting experience. We find that although these practices indeed result in improved customer experience, they can actually result in lower consumption at the individual level.
Do Thank-You Calls Increase Charitable Giving? Expert Forecasts and Field Experimental Evidence
Anya Samek & Chuck Longfield
University of Southern California Working Paper, April 2019
Abstract:
Calling to thank donors is a key fundraising strategy in the non-profit sector. Yet the effectiveness of these calls remains untested. We report on field experiments with public television stations and a national non-profit in which new donors were randomized to receive a thank-you call or not. The experiments involved about 600,000 donors and 500,000 thank-you calls over 6 years. We found a precisely estimated null effect of calls on subsequent giving. This result is in stark contrast to the incentivized forecasts of fundraising professionals and the general public, who anticipated that calls would increase donor retention by about 80%.
The Uncertain Self: How Self-Concept Structure Affects Subscription Choice
Jennifer Savary & Ravi Dhar
Journal of Consumer Research, forthcoming
Abstract:
Whether it is clothing, meals or an exercise regimen, consumers purchase a wide range of goods on a recurring basis using a subscription model. While past research indicates that people continue to subscribe to these services even when they rarely use them, no work to date has examined how identity considerations affect preferences in this domain. Building on research on signaling and self-concept structure, we propose that quitting an ongoing subscription can threaten the stability of the self-concept by signaling a change in identity. Consumers who are uncertain about their self-concept (i.e., low self-concept clarity) and motivated to maintain a stable self-concept are thus more likely to keep unused subscriptions than those who are more certain. In support of the underlying mechanism, we demonstrate that self-concept clarity affects choices only for identity-relevant subscription choices, and that it affects choices for subscriptions, but not one-shot product choices that are a weaker signal of identity. Finally, because signing up for a new subscription also signals an identity change that can threaten the stability of the self, consumers with low self-concept clarity are also less likely to subscribe to a new service compared to those with more certain self-concepts.
The Material-Experiential Asymmetry in Discounting: When Experiential Purchases Lead to More Impatience
Joseph Goodman, Selin Malkoc & Mosi Rosenboim
Journal of Consumer Research, forthcoming
Abstract:
Consumers routinely make decisions about the timing of their consumption, making tradeoffs between consuming now or later. Most of the literature examining impatience considers monetary outcomes (i.e., delaying dollars), implicitly assuming that how the money is spent does not systematically alter impatience levels and patterns. The authors propose an impatience asymmetry for material and experiential purchases based on utility duration. Five studies provide evidence that consumers are more impatient towards experiential purchases compared to material purchases and that this increased impatience is driven by whether the value is extracted over a shorter utility duration (often associated with experiential purchases) or a longer utility duration (often associated with material purchases). Thus, when an experience is consumed over a longer period of time, the results show that impatience can be diminished. Additional results show that the effect holds in both delay and expedite frames and suggest that the results cannot be explained by differences in scheduling, time sensitivity, affect, ownership, future time perspective, or future connectedness.
Peer Effects in Product Adoption
Michael Bailey et al.
NBER Working Paper, May 2019
Abstract:
We study the nature of peer effects in the market for new cell phones. Our analysis builds on de-identified data from Facebook that combine information on social networks with information on users' cell phone models. To identify peer effects, we use variation in friends' new phone acquisitions resulting from random phone losses and carrier-specific contract terms. A new phone purchase by a friend has a substantial positive and long-term effect on an individual's own demand for phones of the same brand, most of which is concentrated on the particular model purchased by the friend. We provide evidence that social learning contributes substantially to the observed peer effects. While peer effects increase the overall demand for cell phones, a friend's purchase of a new phone of a particular brand can reduce individuals' own demand for phones from competing brands -- in particular those running on a different operating system. We discuss the implications of these findings for the nature of firm competition. We also find that stronger peer effects are exerted by more price-sensitive individuals. This positive correlation suggests that the elasticity of aggregate demand is substantially larger than the elasticity of individual demand. Through this channel, peer effects reduce firms' markups and, in many models, contribute to higher consumer surplus and more efficient resource allocation.