Sellout
How Consumers' Political Ideology and Status-Maintenance Goals Interact to Shape Their Desire for Luxury Goods
Jeehye Christine Kim, Brian Park & David Dubois
Journal of Marketing, forthcoming
Abstract:
This research distinguishes between the goal of maintaining one's status from advancing one's status and investigates how consumers' political ideology triggers sensitivity to the status-maintenance (vs. status-advancement) goal, subsequently altering luxury consumption. Because conservative political ideology increases the preference for social stability, the authors propose that conservatives (vs. liberals) are more sensitive to status-maintenance (but not status-advancement) and thus exhibit a greater desire for luxury goods when the status-maintenance goal is activated. Six studies (N = 23,337) assessing status-maintenance using socio-demographic characteristics (Studies 1, 2, 3A) and controlled manipulations including ad framing (Study 3B) and semantic priming (Studies 4, 5) support this proposition. The studies show that the effect is specific to status-maintenance and does not occur (1) in the absence of a status goal or (2) when the status-advancement goal — a focus on increasing status — is activated. Overall, the results show that conservatives' desire for luxury goods stems from the goal of maintaining their status and offer insights on how luxury brands can effectively tailor their communication to audiences with a conservative ideology.
Pricing and Product Design for Vice Goods: A Strategic Analysis
Sanjay Jain & Krista Li
Marketing Science, forthcoming
Abstract:
The rising obesity epidemic is a worldwide concern for consumers, firms, and policy makers. One reason for the rise in obesity is consumers’ over-consumption of vice goods such as cookies, crackers, and soft drinks. Some authors have suggested that firms have incentives to make vice goods unhealthier and to encourage over-consumption. There are calls for regulations to ensure that firms make such products healthier by reducing harmful ingredients and provide nutritional information. Furthermore, public policy makers have begun to educate consumers to avoid over-consumption by using strategies such as pre-purchase planning. In this paper, we investigate how firms selling vice goods should respond to the growing concerns about obesity. We analyze how firms should adjust prices and product design to cater to consumers with self-control problems and obesity concerns. We use the literature on hyperbolic discounting to model consumers with self-control problems. In this framework, we examine how the unhealthiness of vice goods affects prices, firm’s profits, consumer surplus, and public health. In addition, we study how public policy efforts to encourage pre-purchase planning impact firm’s profits and consumers. Our results show that unlike standard goods, for vice goods a decrease in quality (i.e., increase in unhealthiness) and an increase in price can serve as a self-control device and increase demand. Therefore, firms sometimes can charge higher prices and make more profits by producing unhealthier products. Interestingly, producing unhealthier products can sometimes increase consumer surplus and improve public health. We also show that as the proportion of consumers who use pre-purchase planning increases, firms should respond by raising prices. In such situations, consumer surplus and public health improve but firm’s profits decline. These results have important implications for restaurants and firms that sell vice goods and for public policy makers who aim to combat obesity.
Conflict of interest disclosure as an expertise cue: Differential effects due to automatic versus deliberative processing
Sunita Sah, Prashant Malaviya & Debora Thompson
Organizational Behavior and Human Decision Processes, July 2018, Pages 127-146
Abstract:
Disclosure — informing advice recipients of the potential bias of an advisor — is a popular tool to manage conflicts of interest. However, conflict of interest disclosures usually compete with a host of other information that is important, relevant or interesting to the advisee. Across one field study and five experiments, we examine the effect of conflict of interest disclosures in a realistic and context-rich setting (online blogs) in which the disclosure is short, clear and conspicuous (as desired by many regulatory bodies) but embedded in the context of other competing information. Our findings show that, in contrast to much of the prior research on conflict of interest disclosures, recipients who read a blog post containing a conflict of interest disclosure report increased trust in the blogger and evaluate the blogger, the blogger’s recommendation, and the sponsoring organization more favorably than recipients who read a post with no disclosure. The effect is driven by disclosure acting as a heuristic cue to infer greater trust in the blogger’s expertise and consequently greater persuasion. The inference of greater expertise and its effect on persuasion are mitigated when recipients deliberate on the disclosure. We discuss implications of these findings for organizations, advisors, consumers and policy makers.
The Teasing Effect: An Underappreciated Benefit of Creating and Resolving an Uncertainty
Bowen Ruan, Christopher Hsee & Zoe Lu
Journal of Marketing Research, forthcoming
Abstract:
Seven studies covering diverse contexts show an underappreciated benefit of teasing in information acquisition: first creating and then resolving an uncertainty can generate a net positive experience, yet laypeople do not seek out this process. For example, trivia readers report better hedonic experiences if they are first teased with some missing information and then given that information than if they receive all the information at the same time; however, when given a choice, readers prefer to receive all information at the same time. The authors further show that teasing is hedonically beneficial because uncertainty engenders curiosity and thereby builds a potential for a positive experience, whereas uncertainty resolution satisfies the curiosity and thereby realizes that potential. This research yields practical implications by demonstrating that imbuing an ad with an uncertainty creation–resolution process improves the viewer’s attitude toward and increases the viewer’s willingness to try the advertised product.
How Endogenous Crowd Formation Undermines the Wisdom of the Crowd in Online Ratings
Gaël Le Mens et al.
Psychological Science, forthcoming
Abstract:
People frequently consult average ratings on online recommendation platforms before making consumption decisions. Research on the wisdom-of-the-crowd phenomenon suggests that average ratings provide unbiased quality estimates. Yet we argue that the process by which average ratings are updated creates a systematic bias. In analyses of more than 80 million online ratings, we found that items with high average ratings tend to attract more additional ratings than items with low average ratings. We call this asymmetry in how average ratings are updated endogenous crowd formation. Using computer simulations, we showed that it implies the emergence of a negative bias in average ratings. This bias affects items with few ratings particularly strongly, which leads to ranking mistakes. The average-rating rankings of items with few ratings are worse than their quality rankings. We found evidence for the predicted pattern of biases in an experiment and in analyses of large online-rating data sets.
The Visual Asymmetry Effect: An Interplay of Logo Design and Brand Personality on Brand Equity
Jonathan Luffarelli, Antonios Stamatogiannakis & Haiyang Yang
Journal of Marketing Research, forthcoming
Abstract:
Five studies utilizing a variety of experimental approaches and secondary datasets show that a visual property present in all brand logos — the degree of symmetry/asymmetry — can interact with brand personality to impact brand equity. Specifically, compared to symmetrical logos, asymmetrical logos tend to be more arousing, leading to increased perceptions of excitement. As such, consumers tend to perceive asymmetrical logos as more congruent with brands that possess an exciting personality. This can boost consumers' evaluations and the market's financial valuations of such brands, a phenomenon referred to as the visual asymmetry effect. The studies also show that this interplay between brand personality and logo design only occurs for the personality of excitement and the visual property of asymmetry. These findings add to theories of visual design and branding, as well as offer actionable insights to marketing practitioners.
Head vs. Heart: The Effect of Objective versus Feelings-Based Mental Imagery on New Product Creativity
Kelly Herd & Ravi Mehta
Journal of Consumer Research, forthcoming
Abstract:
‘Imagination visual mental imagery,’ a mental simulation process that involves imagining an end-user interacting with an end product, has been proposed as an efficient strategy to incorporate end-user experiences during new product ideation. Consumer research finds that this strategy enhances overall product usefulness, but does not resolve whether and how this process may impact outcome originality. The present work delineates the ‘imagination visual mental imagery’ construct and argues that such mental imagery can take two different routes – one that is more feelings-based (i.e., feelings-imagination), and the other that is more objective (i.e., objective-imagination). Further, it is proposed that although these two approaches will equally benefit outcome usefulness, they will have differential impact on outcome originality. Across five studies, it is demonstrated that adopting a feelings-imagination versus an objective-imagination approach induces higher empathic concern, enhancing cognitive flexibility, which leads to higher outcome originality. Theoretical and managerial implications are discussed.
(What) Do Top Performing Real Estate Agents Deliver for their Clients?
Geoffrey Turnbull & Bennie Waller
Journal of Housing Economics, September 2018, Pages 142-152
Abstract:
Existing evidence indicates that larger listing inventories thin agent effort dedicated to each individual client. This study examines whether shopping externalities or other scale effects offset this inventory externality for agents with the largest market presence. Data from Central Virginia shows that agents holding the greatest percentage of listings in the housing market obtain higher prices and sell listing faster than other agents. This pattern is consistent with the notion that top tier listing agents are able to exploit their market presence to generate meaningful positive shopping externality effects for individual clients. Propensity scoring models provide evidence that the performance advantage of these agents is not driven by differences in the types of houses they represent, but reflects agent productivity. On the other hand, top tier agents in terms of sales do not consistently obtain higher prices or shorter selling times for their listing clients. The shopping externalities associated with top tier listing agents do not appear to extend to top tier selling agents.
Does Adding Inventory Increase Sales? Evidence of a Scarcity Effect in U.S. Automobile Dealerships
Gérard Cachon, Santiago Gallino & Marcelo Olivares
Management Science, forthcoming
Abstract:
What is the relationship between inventory and sales? Clearly, inventory could increase sales: expanding inventory creates more choice (options, colors, etc.) and might signal a popular/desirable product. Or, inventory might encourage a consumer to continue her search (e.g., on the theory that she can return if nothing better is found), thereby decreasing sales (a scarcity effect). We seek to identify these effects in U.S. automobile sales. Our primary research challenge is the endogenous relationship between inventory and sales — e.g., dealers influence their inventory in anticipation of demand. Hence, our estimation strategy relies on weather shocks at upstream production facilities to create exogenous variation in downstream dealership inventory. We find that the impact of adding a vehicle of a particular model to a dealer’s lot depends on which cars the dealer already has. If the added vehicle expands the available set of submodels (e.g., adding a four-door among a set that is exclusively two-door), then sales increase. But if the added vehicle is of the same submodel as an existing vehicle, then sales actually decrease. Hence, expanding variety across submodels should be the first priority when adding inventory — adding inventory within a submodel is actually detrimental. In fact, given how vehicles were allocated to dealerships in practice, we find that adding inventory actually lowered sales. However, our data indicate that there could be a substantial benefit from the implementation of a “maximize variety, minimize duplication” allocation strategy: sales increase by 4.4% without changing the total number of vehicles at each dealership.
To Bargain or Not to Bargain: The Role of Fixed Costs in Price Negotiations
Pranav Jindal & Peter Newberry
Journal of Marketing Research, forthcoming
Abstract:
Retailers routinely allow consumers to negotiate a discount off the posted price, especially for big ticket items such as home appliances, furniture, automobiles, and real estate, as well as on online platforms such as Amazon, eBay and Alibaba. The profitability of such a strategy, relative to selling only at posted prices, depends on consumers' willingness to initiate a negotiation and ability to negotiate a discount. In this paper, we incorporate a consumers' decision of whether or not to negotiate into a demand model. The decision to negotiate hinges on how the expected discount from negotiation compares to the magnitude of a non-pecuniary cost that the consumer incurs by initiating the negotiation. This cost has implications for consumer demand and firm profitability; the current study shows how this cost can be non-parametrically identified, separately from consumers' ability to get a discount and marginal utility of income. The application of this model to individual-level data on refrigerator transactions reveals that, conditional on negotiating, consumers get, on average, 41% of the available surplus and incur an average cost of $28 to initiate a negotiation, which is relatively smaller than the average gains. Demand estimates show that the magnitude of these non-pecuniary costs' affects retailer profits, and the retailer can increase profits by lowering these costs. A move to fixed pricing not only reduces retailers' profits by 37% but also lowers consumer surplus by 18%. Ignoring these costs results in biased estimates of consumers' willingness to pay, translating to annual losses of $1.6 million in the current study setting.
The Fun and Function of Uncertainty: Uncertain Incentives Reinforce Repetition Decisions
Luxi Shen, Christopher Hsee & Joachim Talloen
Journal of Consumer Research, forthcoming
Abstract:
This research studies repetition decisions, namely, whether to repeat a behavior (e.g., a purchase) after receiving an incentive (e.g., a discount). Can uncertainty drive repetition? Four experiments, all involving real consequences for each individual participant, document a counterintuitive reinforcing-uncertainty effect: individuals repeat a behavior more if its incentive is uncertain than if it is certain, even when the certain incentive is financially better. This effect is robust; it holds in both lab and field settings and at both small and large magnitudes. Furthermore, the experiments identify two theory-driven boundary conditions for the reinforcing-uncertainty effect: the effect arises (a) only if the uncertainty is resolved immediately and not if the resolution of uncertainty is delayed, and (b) only after, not before, one has engaged in repetitions. These results support a resolution-as-reward account and cast doubt on other explanations such as reference-dependent preferences. This research reveals the hidden value of uncertain incentives and sheds light on the delicate relationship between incentive uncertainty and repetition decisions.
Information technology in the property market
Yong Suk Lee & Yuya Sasaki
Information Economics and Policy, forthcoming
Abstract:
Information technology is increasingly being utilized in the property market. This paper examines how sensitive house transaction prices are to online price estimates using data collected from Zillow. We find that online property price estimates strongly predict transaction prices even when observable and unobservable house and neighborhood characteristics are controlled for. In addition, we find evidence that suggests that online price estimates may have a direct impact on transaction prices.
Does More Certification Always Benefit a Venture?
Lauren Lanahan & Daniel Armanios
Organization Science, forthcoming
Abstract:
An implicit assumption in institutional theory is that more certifications improve a venture’s likelihood for success. However, under certain conditions, we argue more certifications may be detrimental to the venture’s performance. We advance this notion by examining both who is doing the certification and, in turn, what information is revealed to others through the certification. Our study advances two new constructs based on varying instances of follow-on certification: certification broadening, where the initial and follow-on certifiers are different institutions, and certification redundancy, where the initial and follow-on certifiers are the same institution. By studying sequences of certification in the U.S. Small Business Innovation Research federal and state programs, we find that certification broadening generally increases a firm’s ability to acquire private resources, whereas certification redundancy generally decreases a firm’s ability to acquire private resources. This study advances a more dynamic view of certification within institutional theory — namely, when we disaggregate sequences of certifications, we are able to better ascertain when certification helps a venture and when it does not.