Great Deals
Bad News? Send an AI. Good News? Send a Human
Aaron Garvey, TaeWoo Kim & Adam Duhachek
Journal of Marketing, forthcoming
Abstract:
The present research demonstrates how consumer responses to negative and positive offers are influenced by whether the administering marketing agent is an Artificial Intelligence (AI) or a human. In the case of a product or service offer that is worse than expected, consumers respond better when dealing with an AI agent in the form of increased purchase likelihood and satisfaction. In contrast, for a better than expected offer, consumers respond more positively to a human agent. We demonstrate that AI agents, in comparison to human agents, are perceived to have weaker intentions when administering offers, which accounts for this effect. That is, consumers infer that AI agents lack selfish intentions in the case of an offer that favors the agent and lack benevolent intentions in the case of an offer that favors the customer, thereby dampening the extremity of consumer responses. Moreover, we demonstrate a moderating effect such that marketers may anthropomorphize AI agents to strengthen perceived intentions, providing an avenue to receive due credit from consumers when providing a better offer and mitigate blame when providing a worse offer. Potential ethical concerns with the use of AI to bypass consumer resistance to negative offers are discussed.
Success stories cause false beliefs about success
George Lifchits et al.
Judgment and Decision Making, November 2021, Pages 1439–1463
Abstract:
Many popular books and articles that purport to explain how people, companies, or ideas succeed highlight a few successes chosen to fit a particular narrative. We investigate what effect these highly selected “success narratives” have on readers’ beliefs and decisions. We conducted a large, randomized, pre-registered experiment, showing participants successful firms with founders that all either dropped out of or graduated college, and asked them to make incentive-compatible bets on a new firm. Despite acknowledging biases in the examples, participants’ decisions were very strongly influenced by them. People shown dropout founders were 55 percentage points more likely to bet on a dropout-founded company than people who were shown graduate founders. Most reported medium to high confidence in their bets, and many wrote causal explanations justifying their decision. In light of recent concerns about false information, our findings demonstrate how true but biased information can strongly alter beliefs and decisions.
To be in Vogue: How Mere Proximity to High-Status Neighbors Affects Aspirational Pricing in the U.S. Fashion Industry
Heeyon Kim & Bo Kyung Kim
Strategic Management Journal, forthcoming
Abstract:
This paper examines how proximity to high-status neighbors enables lower-status firms to engage in aspirational pricing. While prior studies have focused on associations based on bilateral agreements, we argue that mere spatial proximity to other high-status firms creates perceived associations, which positively affects the focal firm's aspirational pricing. Furthermore, middle-status firms are most likely to engage in aspirational pricing because they are sufficiently similar to high-status neighbors to expect assimilation, not contrast, effects. Our multi-method approach based on panel data from the U.S. Vogue magazine and an experiment provides converging evidence for our arguments. Being somewhat randomly featured near the advertisements of prominent high-status firms in Vogue positively impacts the subsequent average listed price of the focal firm's products, especially for middle-status firms.
The Disciplining Effect of Status: Evaluator Status Awards and Observed Gender Bias in Evaluations
Tristan Botelho & Marina Gertsberg
Management Science, forthcoming
Abstract:
We theorize that status awards will have a disciplining effect on evaluators, changing how they evaluate. Specifically, status awards will lead evaluators to place less weight on unreliable indicators of candidate quality, such as gender. We test this theory using data from restaurant evaluations on Yelp, focusing on the relationship between an evaluator’s restaurant rating and their reporting of being served by a man or a woman in their review text. We use Yelp’s evaluator status award (“Elite”) to analyze whether observed gender bias in the star ratings given to restaurants decreases after an evaluator receives this status award. We find that evaluators rate restaurants more similarly after receiving the award, regardless of whether they report being served by a man or a woman. Status awards in our context close the gender gap in restaurant ratings by 56.5% (a 0.07 stars improvement out of an initial rating gap of −0.13 stars). This reduction in gender bias is mostly due to a decrease in the number of extremely low (1 star) ratings in reviews that reference female servers. Research on status and evaluations has mostly focused on how evaluators react to increases in candidate status. We demonstrate the importance of evaluator status as a mechanism for decreasing observed gender differences in evaluations.
Preference Reversals Between Digital and Physical Goods
Rhia Catapano, Fuad Shennib & Jonathan Levav
Journal of Marketing Research, forthcoming
Abstract:
The proliferation of digital goods has led to an increased interest in how the digitization of products and services affects consumer behavior. In this paper, the authors show that although consumers are willing to pay more for physical than digital goods, this difference attenuates — and even reverses — when consumers are asked to make a choice between the two product formats. This effect is explained by a contingent weighting principle: In willingness to pay, a quantitative task, consumers anchor on quantitative information (e.g., market beliefs). On the other hand, in choice, a qualitative task, consumers anchor on qualitative information (e.g., which good dominates on the most important attribute). These differences in contingent weighting result in physical goods being preferred in willingness to pay, but their digital equivalent being preferred relatively more in choice. The authors draw conclusions from ten pre-registered experiments and six supplemental studies using a variety of goods in hypothetical and incentive-compatible contexts, as well as within- and between-subjects designs. The paper concludes with a discussion of implications for the marketing of digital goods.
Signaling Through Advertising When an Ad Can Be Blocked
Yuxin Chen & Qihong Liu
Marketing Science, forthcoming
Abstract:
The advance of ad-blocking technology is expected to have profound implications on the advertising industry. This paper makes the first attempt to understand the impacts of ad blocking on consumer’s ad avoidance and optimal reactions by advertiser and ad platform while advertising signals quality. We extend the standard models on ad signaling to the context of ad blocking. Our model incorporates both ad-production cost and ad-distribution cost, and allows ad quality (ad production) to impact consumers’ nuisance costs. We find that, counterintuitively, a lower ad-blocking cost may result in fewer consumers blocking ads and higher profit for the advertiser. This is driven by the signaling function of advertising. In particular, the ad platform reacts to lower ad-blocking cost by lowering the unit ad-distribution cost it charges, forcing the advertiser to spend more on ad production because ad-distribution cost alone is insufficient to signal product quality. The high ad-production cost may offset consumers’ disutility of ad viewing and result in fewer consumers blocking ads when ad blocking becomes less costly. We also confirm the robustness of this insight with various model extensions and discuss the implications of our findings.