New Things

Kevin Lewis

June 28, 2020

What if diamonds did not last forever? Signaling status achievement through ephemeral versus iconic luxury goods
Perrine Desmichel, Nailya Ordabayeva & Bruno Kocher
Organizational Behavior and Human Decision Processes, May 2020, Pages 49-65


Individuals signal status through luxury goods because high status confers social, economic, and psychological benefits. While it is known that luxury (vs. non-luxury) consumption signals individuals' high (vs. low) level of status, it is unclear how individuals' marketplace behaviors influence perceptions of type, or source, of their status. The present research examines how ephemeral and iconic luxury consumption signals individuals' achieved or ascribed social status. Seven studies (and two follow-ups) show that, while ephemeral and iconic luxury consumption signal similar levels of individuals' ascribed status, ephemeral luxury consumption signals individuals' higher achieved social status than iconic luxury consumption. This happens because ephemeral luxury consumption signals individuals' higher creativity than iconic luxury consumption. We outline the boundaries of this phenomenon and demonstrate its behavioral downstream consequences. Our findings offer guidance on how individuals and managers can leverage the status signaling value of ephemeral and iconic luxury goods.

When and Why Consumers "Accidentally" Endanger Their Products
Yaniv Shani et al.
Management Science, forthcoming


In this article, we examine whether consumers may "accidentally" endanger a product they own when a new version of the product is introduced. We propose that owners endanger their product when they want to upgrade to a new version but have difficulty justifying the upgrade and that owners find justification more difficult when a new version offers an improved design but does not offer a significant technological improvement. Owners endanger their product hoping that it will be fortuitously damaged. Product damage provides owners with a good reason to upgrade. Focusing on iPhone as a case study, field data and experiments provide evidence for product endangering, and they support the role of justification in three ways. First, as hypothesized, endangering occurs when the new product offers an improved design but does not offer a significant technological improvement. Second, owners are less likely to endanger a product that is under warranty; therefore, damage to it will not enable upgrading. Third, owners are more likely to endanger their product when their justification concerns are heightened.

Providers Versus Platforms: Marketing Communications in the Sharing Economy
John Costello & Rebecca Walker Reczek
Journal of Marketing, forthcoming


Peer-to-peer (P2P) business models have become increasingly prevalent in the marketplace. However, little is known about what factors influence consumer perceptions of purchases from firms using these models. The authors propose that features inherent to the P2P model lead consumers to perceive high provider-firm independence, where providers are viewed as relatively independent from the platform on which they offer goods/services. Across a series of studies, the authors show that when P2P brands use provider-focused (vs. platform-focused) marketing communications, consumers perceive a purchase as helping an individual provider to a greater extent, which increases consumers' willingness to pay and their likelihood of both making a purchase and downloading the brand's app. This is because provider-focused marketing communications in this context lead consumers to think about their purchase from the provider's perspective, thus adopting an "empathy lens." The authors further show that this effect does not extend to other business models. This work thus identifies provider- (vs. platform-) focused marketing communications as a way for marketing managers of P2P brands to drive important purchase-related outcomes.

The Impact of Prices on Firm Reputation
Michael Luca & Oren Reshef
NBER Working Paper, June 2020


While a business's reputation can impact its pricing, prices can also impact its reputation. To explore the impact of prices on reputation, we investigate daily data on menu prices and online ratings from a large rating and ordering platform. We find that a price increase of 1% leads to a decrease of 3%-5% in the average rating. Consistent with this, the overall distribution of ratings for cheaper restaurants is similar to that of more expensive restaurants. Finally, these effects don't seem to be driven by consumer retaliation against price changes, but by changes in absolute price levels.

The Left-Digit Bias: When and Why Are Consumers Penny Wise and Pound Foolish?
Tatiana Sokolova, Satheesh Seenivasan & Manoj Thomas
Journal of Marketing Research, forthcoming


Consumers' price evaluations are influenced by the left-digit bias, wherein consumers judge the difference between $4.00 and $2.99 to be larger than that between $4.01 and $3.00, even though the numeric differences are identical. This research examines when and why consumers are more likely to fall prey to the left-digit bias. The authors propose that the left-digit bias is stronger in stimulus-based price evaluations, wherein people see the focal price and the reference price side by side, and weaker in memory-based price evaluations, wherein people have to retrieve at least one price from memory. This is because in stimulus-based price evaluations, people tend to rely on perceptual representations of prices without rounding them. In memory-based price evaluations, they rely more on conceptual representations, which makes them more likely to round the prices. Results from six studies - five experiments and a scanner panel study - support the hypothesis that the left-digit bias is stronger in stimulus-based evaluations. These results inform managers about when to use left-digit pricing and characterize fundamental differences between stimulus-based and memory-based evaluations.


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