Buyer Beware
Story Spoilers Don't Spoil Stories
Jonathan Leavitt & Nicholas Christenfeld
Psychological Science, forthcoming
"The enjoyment of fiction via books, television, and movies may depend, in part, on the psychological experience of suspense. Spoilers give away endings before stories begin, which may diminish suspense and impair enjoyment; indeed, as the term would suggest, readers go to considerable lengths to avoid prematurely discovering endings...We gave away the endings of three different sorts of short stories, ironic-twists, mysteries, and more evocative literary stories. Spoiler paragraphs, which briefly discussed the story and described outcomes seemingly inadvertently, were presented before subjects read the story. These paragraphs were designed so that they could work as either independent text, in the spoiler condition, or as the openings of the stories, as though the story were intrinsically spoiled...For the ironic twist stories, subjects significantly preferred spoiled over unspoiled stories (p=.013, 6.20 versus 5.79, Cohen's d=.18), as they did also for the mysteries (p=.001, 7.29 versus 6.60, d=.34). The evocative stories were appreciated less overall, likely due to their more expressly literary aims, but subjects again significantly preferred spoiled over unspoiled versions (p=.019, 5.50 versus 5.03, d=.22). In all three cases, spoiler texts incorporated into the stories were not rated significantly different from unspoiled stories, p's>.4...Spoilers in all these cases may allow readers to organize developments in the story, anticipate the implications of events, and resolve ambiguities that occur in the course of reading...Stories that open by revealing outcomes may lead readers to anticipate additional revelations at the end, thereby denying them the experience of reading with knowledge of the ending. Indeed, it was only spoilers external to the stories that enhanced reader delight; there was no benefit to our editing the classic stories themselves."
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Residential mobility breeds familiarity-seeking
Shigehiro Oishi et al.
Journal of Personality and Social Psychology, forthcoming
Abstract:
Why are American landscapes (e.g., housing developments, shopping malls) so uniform, despite the well-known American penchant for independence and uniqueness? We propose that this paradox can be explained by American mobility: Residential mobility fosters familiarity-seeking and familiarity-liking, while allowing individuals to pursue their personal goals and desires. We reason that people are drawn to familiar objects (e.g., familiar, national chain stores) when they move. We conducted 5 studies to test this idea at the levels of society, individuals, and situations. We found that (a) national chain stores do better in residentially mobile places than in residentially stable places (controlling for other economic and demographic factors; Study 1); (b) individuals who have moved a lot prefer familiar, national chain stores to unfamiliar stores (Studies 2a and 2b); and (c) a residential mobility mindset enhances the mere exposure and familiarity-liking effect (Studies 4 and 5). In Study 5, we demonstrated that the link between mobility and familiarity-liking was mediated by anxiety evoked by mobility.
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Ofer Azar
American Behavioral Scientist, August 2011, Pages 1077-1098
Abstract:
The article presents an experiment that illustrates a behavior denoted "relative thinking." Subjects in the experiment revealed the minimal price difference for which they were willing to spend 20 minutes and go to a cheaper store. Five goods and nine prices were used in a between-subjects design. Subjects showed striking positive correlation between the good's price and their valuation of their time as it was reflected in their decisions. The experiment suggests that subjects think about both the relative and the absolute price differences, even though according to economic theory they should only consider the absolute price difference. Quantifying the effect suggests that consumers' valuation of their time is approximately proportional to the square root of the price of the good they want to purchase. Studying economics courses seems to mitigate relative thinking. Several alternative explanations for the observed behavior are suggested and discussed, but the conclusion is that only the relative thinking explanation can account for the experimental results. Finally, several implications of relative thinking for business strategy are discussed.
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Turning the Hands of Time: Clockwise Movements Increase Preference for Novelty
Sascha Topolinski & Peggy Sparenberg
Social Psychological and Personality Science, forthcoming
Abstract:
The omnipresent abstract symbol for time progression and regression is clockwise versus counterclockwise rotation. It was tested whether merely executing and seeing clockwise (vs. counterclockwise) movements would induce psychological states of temporal progression (vs. regression) and according to motivational orientations toward the future and novelty (vs. the past and familiarity). Supporting this hypothesis, participants who turned cranks counterclockwise preferred familiar over novel stimuli, but participants who turned cranks clockwise preferred novel over old stimuli, reversing the classic mere exposure effect (Experiment 1). Also, participants rotating a cylinder clockwise reported higher scores in the personality measure openness to experience than participants rotating counterclockwise (Experiment 2). Merely passively watching a rotating square had similar but weaker effects on exposure and openness (Experiment 3). Finally, participants chose more unconventional candies from a clockwise than from a counterclockwise Lazy Susan, that is, a turntable (Experiment 4).
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Names and Reputations: An Empirical Analysis
Ryan McDevitt
American Economic Journal: Microeconomics, August 2011, Pages 193-209
Abstract:
This paper tests several predictions from the literature on firm reputation, and confirms a main result: poor performance leads a firm to conceal its reputation. A residential plumbing firm with a record of complaints one standard deviation above the mean is 133.2 percent more likely to change its name. In addition, firms with longer track records are less likely to change their names or exit, while firms with more firm-specific investments, such as advertising, are more likely to change their names than exit. In addition, firms in small markets value their reputations comparatively more than firms in large markets.
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Using Non-Pecuniary Strategies to Influence Behavior: Evidence from a Large Scale Field Experiment
Paul Ferraro & Michael Price
NBER Working Paper, July 2011
Abstract:
Policymakers are increasingly using norm-based messages to influence individual decision-making. We partner with a metropolitan water utility to implement a natural field experiment examining the effect of such messages on residential water demand. The data, drawn from more than 100,000 households, indicate that social comparison messages had a greater influence on behavior than simple pro-social messages or technical information alone. Moreover, our data suggest social comparison messages are most effective among households identified as the least price sensitive: high-users. Yet the effectiveness of such messages wanes over time. Our results thus highlight important complementarities between pecuniary and non-pecuniary strategies.
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How Does Popularity Information Affect Choices? A Field Experiment
Catherine Tucker & Juanjuan Zhang
Management Science, May 2011, Pages 828-842
Abstract:
Popularity information is usually thought to reinforce existing sales trends by encouraging customers to flock to mainstream products with broad appeal. We suggest a countervailing market force: popularity information may benefit niche products with narrow appeal disproportionately, because the same level of popularity implies higher quality for narrow-appeal products than for broad-appeal products. We examine this hypothesis empirically using field experiment data from a website that lists wedding service vendors. Our findings are consistent with this hypothesis: narrow-appeal vendors receive more visits than equally popular broad-appeal vendors after the introduction of popularity information.
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The "IKEA Effect": When Labor Leads to Love
Michael Norton, Daniel Mochon & Dan Ariely
Harvard Working Paper, March 2011
Abstract:
In a series of studies in which consumers assembled IKEA boxes, folded origami, and built sets of Legos, we demonstrate and investigate the boundary conditions for what we term the "IKEA effect" - the increase in valuation of self-made products. Participants saw their amateurish creations - of both utilitarian and hedonic products - as similar in value to the creations of experts, and expected others to share their opinions. Our account suggests that labor leads to increased valuation only when labor results in successful completion of tasks; thus when participants built and then destroyed their creations, or failed to complete them, the IKEA effect dissipated. Finally, we show that labor increases valuation of completed products not just for consumers who profess an interest in "do-it-yourself" projects, but even for those who are relatively uninterested. We discuss the implications of the IKEA effect for marketing managers and organizations more generally.
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Christopher Buccafusco & Christopher Jon Sprigman
University of Chicago Law Review, Winter 2011, Pages 31-52
Abstract:
This Article reports the first experiment to demonstrate the existence of a valuation anomaly associated with the creation of new works. To date, a wealth of social science research has shown that the least amount of money that owners of goods are willing to accept to part with their possessions is often far greater than the amount that purchasers would be willing to pay to obtain them. This phenomenon, known as the endowment effect, may create substantial inefficiencies in many markets. Our experiment demonstrates the existence of a related "creativity effect." We show that creators of works value their creations substantially more than do both potential purchasers of their works and mere owners of the works. The creators in our study valued their works (in this case, paintings) more than four times higher than potential buyers did and almost twice as high as did owners of the works. Further, we provide evidence that these differences are the result of creators' irrational optimism about the quality of their works. We conclude by discussing the implications of these findings for intellectual property (IP) theory in general and IP licensing in particular. Our findings challenge the classical economic approach to IP rights, and they suggest that IP markets may be less efficient than previously recognized.
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Norms, moods, and free lunch: Longitudinal evidence on payments from a Pay-What-You-Want restaurant
Gerhard Riener & Christian Traxler
Journal of Socio-Economics, forthcoming
Abstract:
We study the distribution and evolution of payments in a pay-what-you-want restaurant. Despite missing price tags and despite the option to pay nothing at all, we observe that the vast majority of guests makes strictly positive payments. Over the two years covered by our data, average payments decline slightly, converging at a positive level. At the same time, the number of daily guests increases steadily, resulting in a considerable increase in total revenues. We discuss one possible interpretation of the long-term trend in payments in terms of social norms. We further show that short-term fluctuations in average payments are partly explained by exogenous weather changes. We provide evidence that - in line with work in psychology - weather-induced changes in mood affect payments.
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Measuring the Lifetime Value of Customers Acquired from Google Search Advertising
Tat Chan, Chunhua Wu & Ying Xie
Marketing Science, forthcoming
Abstract:
Our main objective in this paper is to measure the value of customers acquired from Google search advertising accounting for two factors that have been overlooked in the conventional method widely adopted in the industry: (1) the spillover effect of search advertising on customer acquisition and sales in off-line channels and (2) the lifetime value of acquired customers. By merging Web traffic and sales data from a small-sized U.S. firm, we create an individual customer-level panel that tracks all repeated purchases, both online and off-line, and tracks whether or not these purchases were referred from Google search advertising. To estimate the customer lifetime value, we apply the methodology in the customer relationship management literature by developing an integrated model of customer lifetime, transaction rate, and gross profit margin, allowing for individual heterogeneity and a full correlation of the three processes. Results show that customers acquired through Google search advertising in our data have a higher transaction rate than customers acquired from other channels. After accounting for future purchases and spillover to off-line channels, the calculated value of new customers using our approach is much higher than the value obtained using conventional method. The approach used in our study provides a practical framework for firms to evaluate the long-term profit impact of their search advertising investment in a multichannel setting.
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Truly, Madly, Deeply: Consumers in the Throes of Material Possession Love
John Lastovicka & Nancy Sirianni
Journal of Consumer Research, August 2011, Pages 323-342
Abstract:
Our treatment of material possession love expands an understanding of the role that discrete emotional attachment forms play in identifying commercial value for marketers and in enhancing consumer well-being. Employing a mixed-methods research design-relying on both qualitative and quantitative data-we develop and empirically test a three-factor, but seven-faceted, conceptualization of material possession love in four separate consumption contexts (automobiles, computers, bicycles, and firearms). We find love-smitten consumers nurturing their beloved possessions, in part, by buying complementary products and services. We also find that material possession love is empirically tied to loneliness and social affiliation deficits, which suggests a compensatory basis of consumer well-being. We distinguish possession love from the construct of attitude and empirically demonstrate the distinct functionality of each. Our concluding discussion considers our mixed-methods findings and their implications for consumer research.
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Label Confusion: The Groucho Effect of Uncertain Standards
Rick Harbaugh, John Maxwell & Beatrice Roussillon
Management Science, forthcoming
Abstract:
Labels certify that a product meets some standard for quality, but often consumers are unsure of the exact standard that the label represents. Focusing on the case of ecolabels for environmental quality, we show how even small amounts of uncertainty can create consumer confusion that reduces or eliminates the value to firms of adopting voluntary labels. First, consumers are most suspicious of a label when a product with a bad reputation has it, so labels are often unpersuasive at showing that a seemingly bad product is actually good. Second, label proliferation aggravates the effect of uncertainty, causing the informativeness of labels to decrease rather than increase. Third, uncertainty makes labeling and nonlabeling equilibria more likely to coexist as the number of labels increases, so consumers face greater strategic uncertainty over how to interpret the presence or absence of a label. Finally, a label can be legitimitized or spoiled for other products when a product with a good or bad reputation displays it, so firms may adopt labels strategically to manipulate such information spillovers, which further exacerbates label confusion. Managers can reduce label confusion by supporting mandatory labeling or by undertaking investments to make certain labels "focal."
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Uninformative Advertising as an Invitation to Search
Dina Mayzlin & Jiwoong Shin
Marketing Science, July 2011, Pages 666-685
Abstract:
What the firm should say in an advertising message, the choice of content, is a critical managerial decision. Here, we focus on a particular aspect of the advertising content choice: an attribute-focused appeal versus an appeal with no direct information on product attributes. We make two assumptions that capture the reality of the advertising context. First, we assume that the bandwidth of advertising is limited: a firm can only communicate about a limited number of attributes. Second, we assume that consumers are active: they can choose to engage in a costly search to obtain additional product-related information. In this setting, we show that there exists an equilibrium where the high-quality firm chooses to produce messages devoid of any attribute information in order to invite the consumer to engage in search, which is likely to uncover positive information about the product. Whereas most of the previous literature has focused on the decision to advertise as a signal of quality, we show that message content, coupled with consumer search, can also serve as a credible signal of quality. In an extension, we show that our results are robust to endogenizing the firm's decision on the amount of advertising spending.
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The Attribute Carryover Effect: What the "Runner-Up" Option Tells Us about Consumer Choice Processes
Wendy Attaya Boland, Merrie Brucks & Jesper Nielsen
Journal of Consumer Research, forthcoming
Abstract:
The process used to differentiate a top choice from a runner-up can result in a preference reversal among nonselected alternatives, which we term the attribute carryover effect. A series of three experiments demonstrate that a phased choice process can shift attribute preferences. If the top choice is unavailable, consumers with weak attribute preferences are likely to reject their explicitly identified second choice (the runner-up option). Instead, these consumers choose an option that may not meet the initial screening criteria but that does share a desirable, "differentiating" feature with the unavailable top choice. Judgment data indicate that this preference reversal is due to increased salience of the differentiating attribute during the last phase of the original choice, which "carries over" into the subsequent choice. These findings augment our understanding of consumer choice processes and heighten our ability to predict choice outcomes under situations in which a chosen option is unattainable.
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Utpal Dholakia, Siddharth Singh & Robert Westbrook
Journal of Service Research, November 2010, Pages 362-378
Abstract:
Service businesses today make extensive use of post-service experience surveys to obtain feedback from customers on service quality, satisfaction, and future repurchase behavior. Recent research has found that such surveys have the potential to evoke question-behavior effects (QBE) on participating customers and moreover suggests its impact on firm revenues is positive. However, our findings indicate that the effects may not always be beneficial. The research the authors report is set in the automotive quick lube industry and comprises two field experiments and a lab experiment. The authors find that customers participating in firm-sponsored surveys delay immediate service repurchases, thus reducing cash flows, but also accelerate subsequent ones in the following periods. Our results are explained by the inferences that customers make as they participate in such surveys, which affect customer behavior in a complex manner, and provide an additional mechanism to understand the operation of QBEs. One important caution emerging from this finding is that service firms conducting satisfaction surveys for tracking purposes on an ongoing basis should be careful not to survey customers too often.
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Consumers can make decisions in as little as a third of a second
Milica Milosavljevic, Christof Koch & Antonio Rangel
Judgment and Decision Making, August 2011, Pages 520-530
Abstract:
We make hundreds of decisions every day, many of them extremely quickly and without much explicit deliberation. This motivates two important open questions: What is the minimum time required to make choices with above chance accuracy? What is the impact of additional decision-making time on choice accuracy? We investigated these questions in four experiments in which subjects made binary food choices using saccadic or manual responses, under either "speed" or "accuracy" instructions. Subjects were able to make above chance decisions in as little as 313 ms, and choose their preferred food item in over 70% of trials at average speeds of 404 ms. Further, slowing down their responses by either asking them explicitly to be confident about their choices, or to respond with hand movements, generated about a 10% increase in accuracy. Together, these results suggest that consumers can make accurate every-day choices, akin to those made in a grocery store, at significantly faster speeds than previously reported.
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Preferring the One in the Middle: Further Evidence for the Centre-stage Effect
Paul Rodway, Astrid Schepman & Jordana Lambert
Applied Cognitive Psychology, forthcoming
Abstract:
The location of an item influences a person's preference for that item, but it is unclear whether there is a preference for items located on the right or in the centre. In replication of the centre-stage effect, it was found that when participants were presented with a line of five pictures, they preferred pictures in the centre rather than at either end. This applies when the line of pictures was arranged horizontally or vertically and when participants selected from five pairs of identical socks arranged vertically. The results support the centre-stage explanation of location-based preference rather than the hemispheric difference or body-specific accounts. Implications of the effects of location on consumer choices and preference decisions are discussed.
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Corporate Social Responsibility and Competitive Advantage: Overcoming the Trust Barrier
Shuili Du, C.B. Bhattacharya & Sankar Sen
Management Science, forthcoming
Abstract:
This research builds on the complementary corporate social responsibility (CSR) literatures in strategy and marketing to provide insight into the efficacy of CSR as a challenger's competitive weapon against a market leader. Through an investigation of a real-world CSR initiative, we show that the challenger can reap superior business returns (i.e., more positive attitudinal and behavioral outcomes) among consumers who had participated in its CSR initiative, relative to those who were merely aware of the initiative. Specifically, participant consumers demonstrate the desired attitudinal and behavioral changes in favor of the challenger, regardless of their affective trust in the leader, whereas aware consumers' reactions become less favorable as their affective trust in the leader increases. Furthermore, participant consumers, but not aware ones, form a communal, trust-based bond with the challenger.
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The Beauty of Boundaries: When and Why We Seek Structure in Consumption
Keisha Cutright
Journal of Consumer Research, forthcoming
Abstract:
How do consumers cope when it seems that they have no control over their outcomes in life? This research posits that consumers will seek greater structure in consumption - or the sense that everything is in its designated place. Moreover, it suggests that very simple boundaries in the environment offer a means for attaining this sense of structure. Several experiments demonstrate that when personal control is threatened, consumers prefer logos, products and environments that are tangibly or intangibly bounded over those that are unbounded. This research also explores the functional and symbolic benefits that boundaries provide as representations of order and structure.
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Can consumption of convenience products reveal the opportunity cost of time?
Daniel Phaneuf
Economics Letters, October 2011, Pages 92-95
Abstract:
I examine how people's consumption of time saving products can be used to estimate the shadow value of time. I use a household production model to motivate an empirical approach that can be implemented using survey data.