Pay to play
How much is social media worth? Estimating the value of Facebook by paying users to stop using it
Jay Corrigan et al.
PLoS ONE, December 2018
Abstract:
Facebook, the online social network, has more than 2 billion global users. Because those users do not pay for the service, its benefits are hard to measure. We report the results of a series of three non-hypothetical auction experiments where winners are paid to deactivate their Facebook accounts for up to one year. Though the populations sampled and the auction design differ across the experiments, we consistently find the average Facebook user would require more than $1000 to deactivate their account for one year. While the measurable impact Facebook and other free online services have on the economy may be small, our results show that the benefits these services provide for their users are large.
Can Lower-quality Images Lead to Greater Demand on AirBnB?
Shunyuan Zhang et al.
Carnegie Mellon University Working Paper, October 2018
"We investigate how AirBnB hosts make decisions on the quality of property images to post. Prior literature has shown that the images play the role of advertisements and the quality of the images have a strong impact on the present demand of the property - as compared to lower quality amateur images, high quality professional images can increase the present demand by 14.3% on matched samples (Zhang et al. 2018). However, the reality is that there exist a large number (approximately two-thirds) of amateur (low-quality) images on AirBnB. One possible explanation is that these images are costly for the hosts, as most of them are amateur photographers. However, this does not completely explain the result - in 2011, AirBnB started offering highest quality professional images for free to all the hosts by sending their professional photographers to the property and shoot, process and post the photos for the hosts. To AirBnB’s surprise, only 30% of the hosts used the AirBnB professional photography program. We posit that the host’s decision on what quality of images to post depends not only on the advertising impact of images on the present demand and on the cost of images, but also on the impact of images on the future demand. Thus, some hosts would be hesitant to post high-quality images because they can create unrealistically high expectations for the guests, especially if the actual property is not as good as what the images portray and if the hosts are unable to provide a high level of service to match those expectations. This would result in the satisfaction level of guests to decrease, who would then leave a bad review or not write any review at all; and since the number/quality of reviews is one of the key drivers in generating new bookings, this will adversely affect the future demand."
Hide and seek search: Why angels hide and entrepreneurs seek
Merwan Engineer, Paul Schure & Dan Vo
Journal of Economic Behavior & Organization, forthcoming
Abstract:
The angel capital market poses a puzzle for search theory. Angel investors (“angels”) are often described in the literature as if they were hiding from entrepreneurs that seek angel capital investment. Such behavior by angels forces entrepreneurs to engage in costly search for angels. In our model, a separating equilibrium exists in which hiding by angels discourages search by low-productivity entrepreneurs who would inundate any visible angels. Only high-productivity entrepreneurs incur the time and effort costs of search to signal their type and avoid the lemons problem in the visible capital market. As the search market generates higher quality, hence more profitable matches, social surplus may increase despite the induced costs of hiding and searching. Hide and seek search contrasts with standard search theory where agents choose strategies to mitigate inherent physical and informational search frictions.
Not all price endings are created equal: Price points and asymmetric price rigidity
Daniel Levy et al.
Journal of Monetary Economics, forthcoming
Abstract:
We document an asymmetry in the rigidity of 9-ending prices relative to non-9-ending prices. Consumers have difficulty noticing higher prices if they are 9-ending, or noticing price-increases if the new prices are 9-ending, because 9-endings are used as a signal for low prices. Price setters respond strategically to the consumer-heuristic by setting 9-ending prices more often after price-increases than after price-decreases. 9-ending prices, therefore, remain 9-ending more often after price-increases than after price-decreases, leading to asymmetric rigidity: 9-ending prices are more rigid upward than downward. These findings hold for both transaction-prices and regular-prices, and for both inflation and no-inflation periods.
Outwitting the rational mind: How effortful thinking influences price cognition
Mehdi Tanzeeb Hossain & Zhiyong Yang
Journal of Behavioral Decision Making, forthcoming
Abstract:
Prior research presents mixed findings on how people's degrees of effortful thinking influence their reliance on heuristics and biases. Although the tenets of dual process theory would argue that effortful thinking should attenuate people's reliance on heuristics, a number of contemporary findings suggest otherwise: Effortful thinking may, in fact, enhance biased processing of information in certain instances. This research shows how, in the context of pricing, people's degrees of effortful thinking can amplify their inclination towards biased processing of price information. In five studies (n = 1,339), we find that effortful thinking induces a greater preference for nine‐ending (vs. zero‐ending) prices, and the effect is mainly driven by people's greater propensity for argument‐based decision making. Such predilection to nine‐endings attenuates with lower cognitive effort in processing price information. Moreover, when locus of deliberation shifts from price to quality, consumers' preference for nine‐ending priced options is subdued.
The impact of bundle comparisons on bundle preference
Dan Hamilton Rice, Alan Cooke & Yanmei Zheng
Journal of Behavioral Decision Making, forthcoming
Abstract:
The bundling literature largely holds that a person's reaction to a given product bundle depends only on the characteristics of the products contained in the bundle. This paper, instead, proposes that people evaluate bundles in reference to other bundles that they have seen. Prior research indicates that people are sensitive to a bundle's “attribute inventory” or the aggregate level of comparable attributes possessed by its constituent products. We show that when people evaluate a bundle, they compare the attribute inventories that it offers to those offered by other bundles that they have seen. The resulting compositional comparisons can occur without changes to the products that comprise the target and contextual bundles, vary by attribute comparability and attentional focus, and coexist with (and at times reverse the effects of) well‐established product‐specific context effects, which are determined solely by the products and their attributes.