What the Market will Bear

Kevin Lewis

August 02, 2020

Consumers Prefer "Natural" More for Preventatives Than for Curatives
Sydney Scott, Paul Rozin & Deborah
Small Journal of Consumer Research, forthcoming


We demonstrate that natural products are more strongly preferred when used to prevent a problem than when used to cure a problem (the prevent/cure effect). This organizing principle explains variation in the preference for natural across distinct product categories (e.g., food vs. medicine), within product categories (e.g., between different types of medicines), and for the same product depending on how it is used (to prevent or to cure ailments). The prevent/cure effect is driven by two factors: lay beliefs about product attributes and importance of product attributes. Specifically, a) consumers hold lay beliefs that natural products are safer and less potent, and b) consumers care more about safety and less about potency when preventing as compared to when curing, which leads to a stronger preference for natural when preventing. Consistent with this explanation, when natural products are described as more risky and more potent, reversing the standard inferences about naturalness, then natural products become more preferred for curing than for preventing. This research sheds light on when the marketing of "natural" is most appealing to consumers.

The Beneficial Effects of Ad Blockers
Stylianos Despotakis, R. Ravi & Kannan Srinivasan
Management Science, forthcoming


Although online advertising is the lifeline of many internet content platforms, the usage of ad blockers has surged in recent years, presenting a challenge to platforms dependent on ad revenue. Using a simple analytical model with two competing platforms, we show that the presence of ad blockers can actually benefit platforms. In particular, there are conditions under which the optimal equilibrium strategy for the platforms is to allow the use of ad blockers (rather than using an ad-block wall or charging a fee for viewing ad-free content). The key insight is that allowing ad blockers serves to differentiate platform users based on their disutility to viewing ads. This allows platforms to increase their ad intensity on those that do not use the ad blockers and achieve higher returns than in a world without ad blockers. We show robustness of these results when we allow a larger combination of platform strategies, as well as by explaining how ad white-listing schemes offered by modern ad blockers can add value. Our study provides general guidelines for what strategy a platform should follow based on the heterogeneity in the ad sensitivity of their user base.

Spending reflects not only who we are but also who we are around: The joint effects of individual and geographic personality on consumption
Tobias Ebert et al.
Journal of Personality and Social Psychology, forthcoming


Interactionist theories are considered to have resolved the classic person-situation debate by demonstrating that human behavior is most accurately described as a function of both personal characteristics as well as environmental cues. According to these theories, personality traits form part of the personal characteristics that drive behavior. We suggest that psychological theory stands to gain from also considering personality traits as an important environmental characteristic that shapes sociocultural norms and institutions, and, in turn, behavior. Building on research in geographical psychology, we support this proposition by presenting evidence on the relationship of individual and regional personality with spending behavior. Analyzing the spending records of 111,336 participants (31,915,942 unique transactions) across 374 Local Authority Districts (LAD) in the United Kingdom, we first show that geographic regions with higher aggregate scores on a given personality trait collectively spend more money on categories associated with that trait. Shifting the focus to individual level spending as our behavioral outcome (N = 1,716), we further demonstrate that regional personality of a participant's home LAD predicts individual spending above and beyond individual personality. That is, a person's spending reflects both their own personality traits as well as the personality traits of the people around them. We use conditional random forest predictions to highlight the robustness of these findings in the presence of a comprehensive set of individual and regional control variables. Taken together, our findings empirically support the proposition that spending behaviors reflect personality traits as both personal and environmental characteristics.

The Influence of Disease Cues on Preference for Typical versus Atypical Products
Yunhui Huang & Jaideep Sengupta
Journal of Consumer Research, forthcoming


This article examines how exposure to disease-related cues influences consumers' preference for typical (vs. atypical) product options. Merging insights from evolutionary psychology with research on preference for typicality in consumer products, we predict that disease salience decreases relative preference for typical versus atypical options, because typical products are implicitly associated with many people, misaligning them with the people-avoidance motive triggered by disease cues. We further build on this conceptualization to identify situations in which this preference shift might be eliminated. Specifically, we argue that the focal effect will not manifest when the disease in question is explicitly described to be non-contagious, or when an anti-infection intervention is introduced, or when the decision context involves minimum infection. Results from six studies provide support for our predictions, advancing basic knowledge on the evolutionary strategies guiding disease avoidance, while also documenting how such strategies can affect consumer preferences.

Entrepreneurs' facial trustworthiness, gender, and crowdfunding success
Yang Duan et al.
Journal of Corporate Finance, forthcoming


This study examines whether and how entrepreneurs' facial trustworthiness is associated with the success of their crowdfunding campaigns. We adopt a novel dataset extracted from the Kickstarter crowdfunding platform and employ machine learning-based facial detection techniques to construct a comprehensive index that measures facial trustworthiness for our investigation. Our results suggest that entrepreneurs' facial trustworthiness is positively associated with crowdfunding campaign success. Specifically, trustworthy-looking entrepreneurs receive a 13.1% greater pledge amount and attract 4.8% more backers in their crowdfunding campaign as compared to those who are untrustworthy-looking. We also find that the facial trustworthiness of female entrepreneurs plays a more prominent role in determining project success than that of male entrepreneurs. Our results are robust to a series of additional analyses and sensitivity checks. Overall, the results of our study suggest that entrepreneurs' facial trustworthiness is an important factor that affects funders' decision-making process in reward-based crowdfunding.

The self-congruity effect of music
David Greenberg et al.
Journal of Personality and Social Psychology, forthcoming


Music is a universal phenomenon that has existed in every known culture around the world. It plays a prominent role in society by shaping sociocultural interactions between groups and individuals, and by influencing their emotional and intellectual life. Here, we provide evidence for a new theory on musical preferences. Across three studies we show that people prefer the music of artists who have publicly observable personalities ("personas") similar to their own personality traits (the "self-congruity effect of music"). Study 1 (N = 6,279) and Study 2 (N = 75,296) show that the public personality of artists correlates with the personality of their listeners. Study 3 (N = 4,995) builds on this by showing that the fit between the personality of the listener and the artist predicts musical preferences incremental to the fit for gender, age, and even the audio features of music. Our findings are largely consistent across two methodological approaches to operationalizing an artist's public personality: (a) the public personality as reported by the artist's fans, and (b) the public personality as predicted by machine learning on the basis of the artist's lyrics. We discuss the importance of the self-congruity effect of music in the context of group-level process theories and adaptionist accounts of music.

The Causal Effect of Service Satisfaction on Customer Loyalty
Guofang Huang & K. Sudhir
Management Science, forthcoming


We propose an instrumental-variable (IV) approach to estimate the causal effect of service satisfaction on customer loyalty by exploiting a common source of randomness in the assignment of service employees to customers in service queues. Our approach can be applied at no incremental cost by using routine repeated cross-sectional customer survey data collected by firms. The IV approach addresses multiple sources of biases that pose challenges in estimating the causal effect using cross-sectional data: (1) the upward bias from common-methods variance resulting from the joint measurement of service satisfaction and loyalty intent in surveys, (2) the attenuation bias caused by measurement errors in service satisfaction, and (3) the omitted variable bias that may be in either direction. In contrast to the common concern about the upward common-methods bias in estimates using cross-sectional survey data, we find that ordinary-least-squares substantially underestimates the casual effect, suggesting that the downward bias resulting from measurement errors and/or omitted variables is dominant. The underestimation is even more significant with a behavioral measure of loyalty, where there is no common-methods bias. This downward bias leads to significant underestimation of the positive profit impact from improving service satisfaction and can lead to underinvestment by firms in service satisfaction. Finally, we find that the causal effect of service satisfaction on loyalty is greater for more difficult types of services.

Penny for Your Preferences: Leveraging Self-Expression to Encourage Small Prosocial Gifts
Jacqueline Rifkin, Katherine Du & Jonah Berger
Journal of Marketing, forthcoming


Prior approaches that leverage identity to motivate prosocial behavior are often limited to the set of people who already strongly identify with an organization (e.g., prior donors) or by the costs and challenges associated with developing stronger organization-linked identities among a broader audience (e.g., encouraging more people to care). In contrast, this research demonstrates that small prosocial gifts, such as tips or small donations, can be encouraged by framing the act of giving as an opportunity to express identity-relevant preferences-even if such preferences are not explicitly related to prosociality or the organization in need. Rather than simply asking people to give, the "dueling preferences" approach investigated in this research frames the act of giving as a choice between two options (e.g., cats vs. dogs, chocolate vs. vanilla ice cream). Dueling preferences increases prosocial giving by providing potential givers with a greater opportunity for self-expression-an intrinsically desirable opportunity. Seven experiments conducted in the laboratory, online, and in the field support this theorized process while casting doubt on relevant alternatives. This research contributes to work on self-expression and identity and sheds light on how organizations can encourage prosocial behavior.

Preference Refinement After a Budget Contraction
Gretchen Ross, Margaret Meloy & Kurt Carlson
Journal of Consumer Research, forthcoming


How does coping with a resource loss of time, space, or money change a consumer? In the current work, we argue that resource losses that give rise to budget contractions require a coping strategy that not only influences choice in the moment but also changes underlying consumer preferences. We show that the preference restructuring that occurs when coping with a budget loss also leads to stabilization of preferences. Specifically, a consumer who allocates a budget to a set of items prior to a budget contraction and allocates that same budget post-contraction when the budget is fully restored will allocate the restored budget to fewer options in the set. Coping with the contraction helps consumers prioritize what matters to them, leading to refinement of preference. This within-consumer preference refinement effect exists for budgets of time, space, and money. We identify boundary conditions (i.e., significant budget contractions and self-determined contraction allocations are necessary for prioritization to occur) and rule out non-prioritization explanations (e.g., anchoring and under-adjusting). These findings suggest that marketers should focus on capturing consumers who are dealing with budget contractions as this is one of the moments where individuals revisit and rediscover what matters most to them.

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