Price Discrimination

Kevin Lewis

March 03, 2024

When Learning Negative Brand Associations Leads to Positive Evaluations of Effectiveness
Julian Saint Clair & Marcus Cunha
Journal of Consumer Research, forthcoming 


Research on associative learning suggests that marketers can enhance consumer attitudes by repeatedly pairing their brands with pleasant or "positively-valenced" stimuli (e.g., attractive models, babies, cute animals) rather than unpleasant or "negatively-valenced" stimuli (e.g., garbage cans and disgusting insects) --  an evaluative conditioning effect also known as affect transfer. In this research, we combine the associative learning and the goal pursuit literatures to show that the influence of affect transfer on brands depends on the mindset that is active at the time of judgment. Four experiments and one field study uniquely demonstrate that negatively-valenced brand pairings may become desirable when consumers have an instrumentality mindset, which increases attention to the instrumentality, or effectiveness, of a given consumption behavior. This pattern of results occurs due to a bidirectional association between unpleasantness and instrumentality, making a brand with negative associations seem more effective. Results are robust across contexts (health, entertainment, news) and persist regardless of whether the (un)pleasant images are within or adjacent to the advertisement. The effect attenuates when consumers have a weaker association between unpleasantness and instrumentality, and reverses when consumers are cued to focus on favorability (vs. instrumentality). Contributions and implications for associative learning and brand management are discussed.

How Do Consumers Use Firm Disclosure? Evidence from a Randomized Field Experiment
Sinja Leonelli et al.
University of Chicago Working Paper, January 2024 


We combine a large-scale field experiment with a customized survey to study whether and how consumers use firm disclosure. In a sample of more than 24,000 U.S. households, we first establish several stylized facts: (i) the average consumer has a moderate preference to purchase from ESG-responsible firms; (ii) consumers typically have no preference for more or less profitable firms; (iii) consumers rarely consult ESG reports and virtually never use financial reports to inform their purchase decisions. In our field experiment, we then inform households about real firm-disclosed profitability and ESG activities through seven randomized information treatments. Consumers increase their purchase intent when exogenously presented with firm-disclosed positive signals about environmental, social, and -- to a lesser extent -- governance activities. Full ESG reports only have an impact on consumers who choose to view them, whereas financial reports and earnings information do not have an effect. After the experiment, consumers increase their actual product purchases, but these effects are small, short-lived, and only materialize for viewed ESG reports and positive social signals. Through a follow-up survey, we provide explanations for why consumers (do not) change their shopping behavior after our information experiment.

How Does Rating Specific Features of an Experience Alter Consumers' Overall Evaluations of That Experience?
Katie Mehr & Joseph Simmons
Journal of Consumer Research, forthcoming 


How does the way companies elicit ratings from consumers affect the ratings that they receive? In 10 pre-registered experiments, we find that consumers rate subpar experiences more positively overall when they are also asked to rate specific aspects of those experiences (e.g., a restaurant's food, service, and ambiance). Studies 1-4 established the basic effect across different scenarios and experiences. Study 5 found that the effect is limited to being asked to rate specific features of an experience, rather than providing open-ended comments about those features. Studies 6-9 provided evidence that the effect does not emerge because rating positive aspects of a subpar experience reminds consumers that their experiences had some good features. Rather, it emerges because consumers want to avoid incorporating negative information into both the overall and the attribute ratings. Lastly, study 10 found that asking consumers to rate attributes of a subpar experience reduces the predictive validity of their overall rating. We discuss implications of this work and reconcile it with conflicting findings in the literature.

The Value of Open Source Software
Manuel Hoffmann, Frank Nagle & Yanuo Zhou
Harvard Working Paper, January 2024 


The value of a non-pecuniary (free) product is inherently difficult to assess. A pervasive example is open source software (OSS), a global public good that plays a vital role in the economy and is foundational for most technology we use today. However, it is difficult to measure the value of OSS due to its non-pecuniary nature and lack of centralized usage tracking. Therefore, OSS remains largely unaccounted for in economic measures. Although prior studies have estimated the supply side costs to recreate this software, a lack of data has hampered estimating the much larger demand-side (usage) value created by OSS. Therefore, to understand the complete economic and social value of widely-used OSS, we leverage unique global data from two complementary sources capturing OSS usage by millions of global firms. We first estimate the supply-side value by calculating the cost to recreate the most widely used OSS once. We then calculate the demand side value based on a replacement value for each firm that uses the software and would need to build it internally if OSS did not exist. We estimate the supply-side value of widely-used OSS is $4.15 billion, but that the demand-side value is much larger at $8.8 trillion. We find that firms would need to spend 3.5 times more on software than they currently do if OSS did not exist. The top six programming languages in our sample comprise 84% of the demand-side value of OSS. Further, 96% of the demand-side value is created by only 5% of OSS developers.

The effects of franchising on stores, competitors, and consumers
Jeff Ackermann
International Journal of Industrial Organization, March 2024 


Following a corporate acquisition, a casual dining chain sold all of its company-owned stores to franchisees. I exploit this change in franchise status to estimate the effects of franchising. I use a utility-based choice model to predict alcohol sales for all liquor-selling bars and restaurants in Texas over a 10-year period. Using this model, I find that franchising a restaurant increases its revenues by 7 percent. A substantial share of this revenue increase comes at the expense of competing national chains. I also find that franchising a store produces a consumer utility gain equal to the gain that would result from a 2.8-mile reduction in distance from the individual's home to the store.

Technology and Disintermediation in Online Marketplaces
Grace Gu
Management Science, forthcoming 


With the development of communication technology that makes online transactions easier, there is also an increased risk of disintermediation -- sellers and buyers circumventing a platform to transact directly -- in online two-sided marketplaces. Such disintermediation may lead to significant revenue loss for online platforms. However, it remains unclear how the characteristics of platforms affect their vulnerability to disintermediation. Using the blockade of Skype in mainland China as a natural experiment, this study examines how online communication technologies affect disintermediation and transaction outcomes in a large U.S. online freelance marketplace. The results show that restricting this alternative communication technology, which platforms struggle to monitor, reduces disintermediation by around 18%. This effect is potentially due to economic frictions in transactions, as the reduction in disintermediation is greater for high-transaction-cost jobs, such as time-sensitive jobs, communication-intensive jobs, and high-skilled jobs, as well as for cost-sensitive users, such as experienced users and personal users as opposed to enterprise users. With these results, platforms can reduce disintermediation risks when making investment and market entry decisions.


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