Faculty Research Highlights

Q
show

Research Highlights: 2014

A

"How to Measure Motivation: A Guide for the Experimental Social Psychologist"
Ayelet Fishbach with M. Touré-Tillery
Social and Personality Psychology Compass (forthcoming).

This article examines cognitive, affective, and behavioral measures of motivation and reviews their use throughout the discipline of experimental social psychology. We distinguish between two dimensions of motivation (outcome-focused motivation and process-focused motivation). We discuss circumstances under which measures may help distinguish between different dimensions of motivation, as well as circumstances under which measures may capture different dimensions of motivation in similar ways. Furthermore, we examine situations in which various measures may capture fluctuations in non-motivational factors, such as learning or physiological depletion. This analysis seeks to advance research in experimental social psychology by highlighting the need for caution when selecting measures of motivation and when interpreting fluctuations captured by these measures.

"If it’s Useful and You Know it, Do You Eat? Preschoolers Refrain from Instrumental Food" 
Ayelet Fishbach with Michael Maimaran
Journal of Consumer Research (forthcoming)

Marketers, educators, and caregivers often refer to instrumental benefits to convince preschoolers to eat (e.g., “this food will make you strong”). We propose that preschoolers infer that if food is instrumental to achieve a goal, it is less tasty, and therefore they consume less of it. Accordingly, we find that preschoolers (3-5.5 years old) rated crackers as less tasty and consumed fewer of them when the crackers were presented as instrumental to achieve a health goal (studies 1-2). In addition, preschoolers consumed fewer carrots and crackers when these were presented as instrumental to knowing how to read (study 3) and count (studies 4-5). This research supports an inference account for the negative impact of certain persuasive messages on 
consumption: preschoolers who are exposed to one association (e.g., between eating carrots and intellectual performance) infer another association (e.g., between carrots and taste) must be weaker. 

"Choice and Self: How Synchronic and Diachronic Identity Shape Choices and Decision Making" 
Oleg Urminsky and Dan Bartels with Paola Giuliano,  George Newman,  Stefano Puntoni, Lance Rips 
Marketing Letters (forthcoming)

Research on the role of identity in choice varies widely across fields like psychology, philosophy, consumer behavior, and economics, in both the key questions addressed and the methods of investigation. Although a large literature has established how salient aspects of identity affect attitudes and norms, less is known about how beliefs concerning identity are shaped and how these beliefs affect decision making. In this review, we cover recent insights into these issues and summarize some newer, developing approaches to understanding (i) how people judge the persistence of identity, (ii) how beliefs about future changes in identity are formed and how they affect choices, (iii) the formation of beliefs about future changes in identity and how these beliefs affect decisions, (iv) the historical and economic antecedents of identity norms and their consequences for economic behavior. We introduce a distinction between synchronic and diachronic approaches, and highlight important unresolved questions that will help these fields to more fully understand the role that identity plays in shaping choices.

"Lay Rationalism: Individual Differences in Using Reason versus Feelings to Guide Decisions"
Chris Hsee with Yang Yang, Xingshan Zheng, and Hanwei Wang
Journal of Marketing Research (2014)

People have a lay notion of rationality—using reason rather than feelings to guide decisions. Yet individuals differ in the degree to which they actually base their decisions on reason versus feelings. This individual difference variable is potentially general and important but is largely overlooked. The present research (a) introduces the construct of lay rationalism to capture this individual difference variable and distinguishes it from other individual-difference variables, (b) develops a short and easy-to-implement scale to measure lay rationalism and demonstrates the validity and reliability of the scale, and (c) shows that lay rationalism, as measured by the short scale, can predict a variety of consumer-relevant behaviors, including product preferences, savings decisions, and donation behaviors.

How do firms make money selling digital goods online?
Anita Rao with Anja Lambrecht, Avi Goldfarb, Alessandro Bonatti, Anindya Ghose, Daniel G. Goldstein, Randall Lewis, Navdeep Sahni, Song Yao
Marketing Letters (2014)

We review research on revenue models used by online firms who offer digital goods. Such goods are nonrival, have near zero marginal cost of production and distribution, low marginal cost of consumer search, and low transaction costs. Additionally, firms can easily observe and measure consumer behavior. We start by asking what consumers can offer in exchange for digital goods. We suggest that consumers can offer their money, personal information, or time. Firms, in turn, can generate revenue by selling digital content, brokering consumer information, or showing advertising. We discuss the firm’s trade-off in choosing between the different revenue streams, such as offering paid content or free content while relying on advertising revenues. We then turn to specific challenges firms face when choosing a revenue model based on either content, information, or advertising. Additionally, we discuss nascent revenue models that combine different revenue streams such as crowdfunding (content and information) or blogs (information and advertising). We conclude with a discussion of opportunities for future research including implications for firms’ revenue models from the increasing importance of the mobile Internet.

"Latent scope bias in categorization" 
Abigail Sussman with Sangeet S. Khemlani and Daniel M. Oppenheimer
Journal of Experimental Social Psychology (2014)

Categories often have unobservable diagnostic features. For example, if a person is a lawyer, one might expect him to be both well dressed and knowledgeable about the law. However, without observing the person in a courtroom, one cannot tell whether or not he is knowledgeable about the law. How might we categorize the well-dressed person before we know whether or not he possesses a particular category feature? Two studies showed that, all else equal, individuals prefer to group exemplars into categories that specify fewer unobserved and unobservable features — i.e., those that have a narrower latent scope — to those with a broader latent scope. In Experiment 1, participants were more likely to classify novel exemplars as part of a social category that had a narrower latent scope in a verbal task. Experiment 2 demonstrated that the scope bias generalizes to contexts in which category structure is never explicitly specified.



Q
show

Research Highlights: 2013

A

"Blogs, Advertising, and Local Market Movie Box Office Performance"
Pradeep K. Chintagunta with Shyam Gopinath and Sriram Venkataraman
Management Science, (forthcoming)

In this study, our objective is to understand differences across geographic markets in their responsiveness to consumer generated media. Our empirical context is the US motion-picture industry, for which we try to infer the causal effects of prerelease consumergenerated blogs (volume and valence) and of firm generated media (i.e., prerelease advertising) on local market-level box office performance of a new movie. Identifying the causal effects of blogs on box office performance is an inherently challenging task given the presence of unobservable characteristics that influence box office performance that are likely to be correlated with the blog measures. Our identification strategy uses the variation in box office performance across markets to estimate movie fixed effects (that “absorb” the “average” effects of blogs across markets) and the deviations (from the average effect) of the effects of blogs across markets, while controlling for other observed and unobserved factors that influence local market box office performance. Then we recover the average blog and advertising effects by regressing the movie fixed effects on market invariant factors such as blogs, prerelease national advertising, etc., while using instrumental variables (IV) to deal with the correlated unobservables problem. Further, even if we do not have access to reasonable instruments for the blog measures and hence cannot recover the average effect, we can nevertheless quantify the extent of heterogeneity across markets. Our findings reveal considerable heterogeneity across markets in their responsiveness to traditional advertising and to consumer-generated blogs; while 197 of 208 markets show significant advertising elasticities, only 50 of 208 markets show significant effects of blog volume on box office performance. Finally, combining our results on market-level responsiveness to traditional advertising and consumer-generated media, we provide strategic recommendations to studios on movie launch decisions.


"Over-Earning"
Christopher K. Hs ee with Jiao Zhang, Cindy Cai, and Shirley Zhang

Psychological Science, (forthcoming)

High productivity and high earning rates brought about by modern technologies make it possible for people to work less and enjoy more. Yet many continue to work assiduously to earn more. Do people over-earn—forgo leisure to work and earn beyond their needs? This question is under-studied, partly because in real life, determining the right amount of earning and defining over-earning are difficult. In this research, we introduce a minimalistic paradigm that allows researchers to study over-earning in a controlled laboratory setting. Using the paradigm, we found that individuals do over-earn, even at the cost of happiness, and over-earning is a result of mindless accumulation rather than reasons such as uncertainty about the future or enjoyment of work. Supporting the mindless-accumulation notion, we showed that prompting participants to consider the consequences of their earnings or denying them excessive earnings could disrupt mindless accumulation and enhance happiness.

"Conditional Projection: How Own Evaluations Influence Beliefs About Others Whose Choices Are Known"
Oleg Urminsky with A. Yeşim Orhun

Journal of Marketing Research, 50(1), 111–124, (2013)

The authors study how a person’s evaluation of choice options influences his or her estimates of other people’s evaluations when their choices are known. The study shows that people rely on the relationship between their own evaluations and their final decision to make sense of others, projecting their evaluations of the corresponding options. A person’s liking of the option he or she chose between two alternatives influences the person’s estimates of others’ liking of the option they chose, regardless of whether it matches his or her own choice. Likewise, a person’s evaluation of the rejected option affects his or her estimate of others’ evaluations of the option they rejected. Across four studies, the authors provide evidence of conditional projection in political and consumer decisions, using across-people differences in ratings of choice options, within-person changes in ratings, and manipulated differences in participants’ ratings. The authors also demonstrate that existing accounts of projection do not directly predict these findings and rule out other alternative explanations.

"Making Sense of Nonsense: The Visual Salience of Units Determines Sensitivity to Magnitude"
Oleg Urminsky with Luxi Shen

Psychological Science, 24(3), 297–304, (2013)

When are people sensitive to the magnitude of numerical information presented in unfamiliar units, such as a price in a foreign currency or a measurement of an unfamiliar product attribute? We propose that people exhibit deliberational blindness, a failure to consider the meaning of even unfamiliar units. When an unfamiliar unit is not salient, people fail to take their lack of knowledge into account, and their judgments reflect sensitivity to the magnitude of the number. However, subtly manipulating the visual salience of the unit (e.g., enlarging its font size relative to the font size of the number) prompts recognition of the unit’s unfamiliarity and reduces magnitude sensitivity. In five experiments, we demonstrated this unit-salience effect, provided evidence for deliberational blindness, and ruled out alternative explanations, such as nonperception and fluency. These findings have implications for decision making involving numerical information expressed in both unfamiliar units and familiar but poorly calibrated units.

Q
show

Research Highlights: 2012

A

"The Evolution of Brand Preferences: Evidence from Consumer Migration"
Jean-Pierre Dubé and Matthew Gentzkow
 
American Economic Review, 102(6): 2472-2508, (2012)

We study the long-run evolution of brand preferences using new data on consumers' life histories and purchases of consumer packaged goods. Variation in where consumers have lived in the past allows us to isolate the causal effect of past experiences on current purchases, holding constant contemporaneous supply-side factors. We show that brand preferences form endogenously, are highly persistent, and explain 40 percent of geographic variation in market shares. Counterfactuals suggest that brand preferences create large entry barriers and durable advantages for incumbent firms and can explain the persistence of early-mover advantage over long periods.

"Improving the Numerical Performance of BLP Static and Dynamic Discrete Choice Random Coefficients Demand Estimation"
Jean-Pierre Dubé, with Jeremy Fox and Che-Lin Su

Econometrica, 80(5), 2231–2267, (2012)

The widely used estimator of Berry, Levinsohn, and Pakes (1995) produces estimates of consumer preferences from a discrete choice demand model with random coefficients, market-level demand shocks, and endogenous prices. We derive numerical theory results characterizing the properties of the nested fixed point algorithm used to evaluate the objective function of BLP’s estimator. We discuss problems with typical implementations, including cases that can lead to incorrect parameter estimates. As a solution, we recast estimation as a mathematical program with equilibrium constraints, which can be faster and which avoids the numerical issues associated with nested inner loops. The advantages are even more pronounced for forward-looking demand models here Bellman’s equation must also be solved repeatedly. Several Monte Carlo and real-data experiments support our numerical concerns about the nested fixed point approach and the advantages of constrained optimization.

"Fate or Fight: Exploring the Hedonic Cost of Free Competition"
Christopher K. Hsee, with Luxi Shen, Shirley Zhang, Jingqiu Chen, and Li Zhang

Organizational Behavior and Human Decision Processes, 119, 177–186, (2012)

As a resource allocation method, free competition is generally considered more efficient and fairer than binding assignment, yet individuals’ hedonic experiences in these different resource allocation conditions are largely ignored. Using a minimalistic experimental simulation procedure, we compared participants’ hedonic experiences between a free-competition condition (in which participants could equally and freely compete for the superior resource) and a binding-assignment condition (in which the superior and inferior resources were unequally and irreversibly assigned to different participants). We found that individuals in the binding-assignment condition—even the disadvantaged ones—were happier than those in the free-competition condition. We attributed the effect to individuals’ peace of mind and supported the peace-of-mind notion by identifying two moderators: ease of social comparison and enjoyability of the inferior resource. In sum, this research highlighted the hedonic aspects of resource allocation methods and identified when accepting one’s fate is hedonically better than fighting for the best.

"When Thinking about Goals Undermines Goal Pursuit"
Ayelet Fishbach with Benjamin Converse

Organizational Behavior and Human Decision Processes, 118, 99–107, (2012)

We explore how attending the goals an activity achieves (i.e., its instrumentality) impacts the motivation to pursue the activity. We propose that the focus on the activity’s instrumentality renders the activity more valuable yet its experience less positive. Because experience is mainly salient while pursuing (vs. planning) an activity, attending the activity’s instrumentality increases the intention to pursue the activity but decreases how persistently individuals pursue it. We document this impact of attending goals on increased intentions but decreased persistence on various activities, from exercising on a treadmill (study 1) and creating origami (study 2) to dental flossing (study 3) and practicing yoga (study 4).

"The Small-Area Hypothesis: Effects of Progress Monitoring on Goal Adherence"
Ayelet Fishbach with Minjung Koo

Journal of Consumer Research, 39(3), 493–509, (2012)

This article examines a small-area hypothesis: individuals striving toward a goal end state exhibit greater motivation when their attention is directed to whichever is smaller in size—their accumulated or remaining progress. The result is that, at the beginning of goal pursuit, directing attention to accumulated progress increases goal adherence relative to directing attention to remaining progress (e.g., 20 percent completed is more impactful than 80 percent remaining). However, with closeness to the goal, directing attention to accumulated progress lessens goal adherence relative to directing attention to remaining progress (e.g., 20 percent remaining is more impactful than 80 percent completed; studies 1–2). The focus on small areas increases motivation by creating an illusion of fast progress (study 3). Therefore, when individuals wish to prolong goal pursuit and avoid reaching the goal’s end state, they slow down goal adherence when their attention is directed to small areas (study 4).

"When Brands Seem Human, Do Humans Act Like Brands? Automatic Priming Effects for Anthropomorphized Brands"
Ann L. McGill with Pankaj Aggarwal

Journal of Consumer Research, 39(2), 307–323, (2012)

This research examines automatic behavioral effects of priming brands that are anthropomorphized. It posits that anthropomorphized brands trigger people’s goals for a successful social interaction, resulting in behavior that is assimilative or contrastive to the brand’s image. Three studies show that consumers are more likely to assimilate behavior associated with anthropomorphized partner brands that they like, consistent with the goal of drawing in the liked coproducer, and servant brands that they dislike, consistent with the goal of pushing the disliked would-be helper away by signaling self-sufficiency. Results also show a contrastive behavior when primed with disliked partner brands and liked servant brands. These effects are observed in contexts unrelated to the brand prime. For example, priming Kellogg’s, a liked partner brand associated with healthfulness, led to greater willingness to take the stairs than the elevator in a purportedly unrelated study. No effects were observed of priming brands that were not anthropomorphized.

"Tell Me What I Did Wrong: Experts Seek and Respond to Negative Feedback"
Ayelet Fishbach and Stacey R. Finkelstein

Journal of Consumer Research, 39(1), 22-38, (2012)

A large proportion of marketing communication concerns feedback to consumers. This article explores what feedback people seek and respond to. We predict and find a shift from positive to negative feedback as people gain expertise. We document this shift in a variety of domains including feedback on language acquisition, pursuit of environmental causes, and use of consumer products. Across these domains, novices sought and responded to positive feedback, and experts sought and responded to negative feedback. We examine a motivational account for the shift in feedback: positive feedback increased novices' commitment and negative feedback increased experts' sense that they were making insufficient progress. 

Q
show

Research Highlights: 2011

A

"On Intertemporal Selfishness: How the Perceived Instability of Identity Underlies Impatient Consumption"
Daniel M. Bartels and Oleg Urminsky

Journal of Consumer Research, 38(1), 182-198, (2011)

Many of life’s major decisions involve trading off consumption or happiness in the immediate future with (more) consumption or happiness delayed to the more distant future. However, your distant future self may be a very different person than you are now, and we show that this factor strongly influences intertemporal preferences. Specifically, we explore connectedness to the future self as an explanation of intertemporal preferences for consumer goods. Smaller, immediate benefits may be more attractive when you are more closely connected psychologically to your tomorrow’s self than to the future self that would receive deferred benefits. We show that when people’s own sense of continuity with the future self is reduced, they accept smaller, sooner rewards, become less willing to wait to buy a computer in order to save money, and demand a larger premium to delay receipt of a gift card. When discontinuity with the future self is anticipated, people behave relatively impatiently—choosing to speed up the consumption of utility—than when connectedness to the future self is perceived.

"Discrete Choice Models of Consumer Demand in Marketing"
Pradeep K. Chintagunta with Harikesh Nair

Marketing Science, 30(6), 977–996, (2011)

Marketing researchers have used models of consumer demand to forecast future sales, to describe and test theories of behavior, and to measure the response to marketing interventions. The basic framework typically starts from microfoundations of expected utility theory to obtain an econometric system that describes consumers’ choices over available options, and to thus characterize product demand. The basic framework has been augmented significantly to account for quantity choices, to accommodate purchases of several products on a single purchase occasion (multiple discreteness and multicategory purchases), and to allow for asymmetric switching between brands across different price tiers. These extensions have enabled researchers to bring the analysis to bear on several related marketing phenomena of interest. This paper has three main objectives. The first objective is to articulate the main goals of demand analysis—forecasting, measurement, and testing—and to highlight several considerations associated with these goals. Our second objective is to describe the main building blocks of individual-level demand models. We discuss approaches built on direct and indirect utility specifications of demand systems, and we review extensions that have appeared in the marketing literature. The third objective is to explore a few emerging directions in demand analysis, including considering demand-side dynamics, combining purchase data with primary information, and using semiparametric and nonparametric approaches. We hope researchers new to this literature will take away a broader perspective on these models and see the potential for new directions in future research.

"Effect of Marketing Contacts in Business Markets"
Pradeep K. Chintagunta, V. Kumar, S. Sriram, and Anita Luo

Marketing Science, 30(5), 924-940, (2011)

Recent research has empirically characterized the buyer-seller relationship as dynamically evolving from one discrete state to another. Conventional wisdom would suggest that a customer in a higher relationship state that has a higher transaction value would also have greater lifetime value to the firm. However, recent evidence suggests that higher relationship states can be ephemeral. Hence, the link between transaction value and lifetime value is not obvious. In this study, we seek to understand, within a specific empirical context, (i) the relationship between a customer's transaction value and that customer's lifetime value and (ii) the relationship between the lifetime value of a customer and the optimal level of marketing activity that needs to be directed at that customer. To this end, we develop a trivariate Tobit hidden Markov model that allows for (a) transitions among relationship states, (b) possible synergies between the various products that the supplier firm offers, (c) endogeneity in marketing activity, (d) heterogeneity in model parameters, and (e) the presence of the no purchase option. Our results reinforce recent findings by Schweidel et al. [Schweidel, D. A., E. T. Bradlow, P. S. Fader. 2011. Portfolio dynamics for customers of a multiservice provider. Management Sci. 57(3) 471-486] that higher relationship states can be short-lived. Importantly for the supplier firm, a customer in the highest relationship state in a given period does not yield the highest lifetime value to the firm. Hence, the relationship between transaction value (i.e., relationship state) and lifetime value can be nonmonotonic. At the same time, we also find a nonmonotonic relationship between the optimal expenditures that should be directed at a customer and that customer's lifetime value; i.e., the optimal level of marketing contacts is not the highest for customers with the highest lifetime value. Furthermore, we find that the optimal marketing expenditures for myopic agents are 14 - 33 percent lower than the corresponding values for forward-looking agents. Therefore, not accounting for the long-term effects of marketing contacts would lead to suboptimal marketing budgets. Moreover, a comparison with the current marketing expenditures suggests that the current practice is closer to the myopic policy than to the forward-looking one.

"A New Multivariate Count Data Model to Study Multi-Category Physician Prescription Behavior"
Pradeep K. Chintagunta, Xiaojing Dong and Puneet Manchanda 

Quantitative Marketing & Economics, 9(3), 301-337, (2011)

Multivariate count models represent a natural way of accommodating data from multiple product categories when the dependent variable in each category is represented by a positive integer. In this paper, we propose a new simultaneous equation multicategory count data model - the Poisson-lognormal simultaneous equation model - that allows for the Poisson parameter in one equation to be a function of the Poisson parameters in other equations. While generally applicable to any situation where simultaneity is an issue and the dependent variables are measured as counts, such a specification is particularly useful for our empirical application where physicians prescribe drugs in multiple categories. Accounting for the endogeneity of detailing in such situations requires us to explicitly allow for pharmaceutical firms' detailing activities in one category to be influenced by their activities in other categories. Estimation of such a system of equations using traditional maximum likelihood method is cumbersome, so we propose a simple solution based on using Markov Chain Monte Carlo methods. Our simulation study demonstrates the validity of the solution algorithm and the biases that would result if such simultaneity is ignored in the estimation process.

"Tariff Choice with Consumer Learning and Switching Costs"
Ronald Goettler and Karen Clay

Journal of Marketing Research, 48 (4), 633-652, (2011)

Consumers choosing at-rate contracts tend to have insufficient usage to warrant the cost, particularly for new products. We propose and estimate a Bayesian learning model of tariff and usage choice that explains this “at-rate bias” without relying on behavioral misjudgments or tariff-specific preferences. For new products, consumers are uncertain about both their utility relative to the population mean and the mean itself. We show that this latter uncertainty inates prior variances, which leads consumers to weight their private signals more heavily when updating beliefs. Posteriors are unbiased across products. For a given product, however, the unknown mean yields a “winner's curse”: consumers with high posteriors tend to overestimate their utility. These consumers choose fixed-rate tariffs and lower their usage as they correct their beliefs. The at-rate bias arises when switching costs deter them from changing tariffs. Using the estimated model, we find tariff menus are ineffective screening devices for price discrimination by an online grocer. Predicted revenues increase by 20 percent when the per-use tariff is dropped, since more consumers choose and stay with the at rate.

"Does AMD Spur Intel to Innovate More?"
Ronald L. Goettler and Brett Gordon 

Journal of Political Economy, 119(6), 1141-1200, (2011)

We estimate an equilibrium model of dynamic oligopoly with durable goods and endogenous innovation to examine the effect of competition on innovation in the PC microprocessor industry. Firms make dynamic pricing and investment decisions while consumers make dynamic upgrade decisions, anticipating product improvements and price declines. Consistent with Schumpeter, we find the rate of innovation in product quality would be 4.2 percent higher without AMD present, though higher prices reduce consumer surplus by $12 billion per year. Comparative statics illustrate the role of product durability and provide implications of the model for other industries.

"The Supremacy of Singular Subjectivity: Improving Decision Quality by Removing Objective Specifications and Direct Comparisons"
Christopher K. Hsee with Y. Liu, A. Yang, and L. Zhang

Journal of Consumer Psychology, 21(4), 393-404, (2011)

When making purchase decisions, consumers want objective product specifications and seek direct product comparison. The present research demonstrates that consumers can make better decisions (i.e., choose what yields a better consumption experience) if objective specifications are removed and direct comparison is inhibited than if not, and this is true even if consumers cannot experience the target products themselves at the time of choice (such as in online shopping). The reason is that consumption is largely subjective and noncomparative, and decisions based on subjective and noncomparative information are often more compatible with consumption. In general discussion, we explore the boundary conditions of our findings and the implications of this research for a new way of marketing that emphasizes subjectivity over objectivity and noncomparison over comparison.

"Gut Liking for the Ordinary: Incorporating Design Fluency Improves Automobile Sales Forecasts"
Aparna Labroo, Jan Landwehr, and Andreas Hermann

Marketing Science, 30 (3), 416-430, (2011)

Lab studies show that visual processing of prototypic but complex designs is surprisingly fluent and fluency evokes positive gut reactions that become associated with the design. But do such gut reactions impact important real-world purchases? Using car sales data, and creating objective design prototypicality and complexity measures that are independent of sales, we tested whether accounting for fluency can improve forecasting models. We professionally photographed the frontal designs of 28 popular models, morphed the images, and created objective prototypicality (car-to-morph Euclidian proximity) and complexity (size of a compressed image file) scores for each car. Incorporating the interactive influence of these two factors improved sales forecasts by up to 19 percent (controlling for brand preference, retail price, technological sophistication, and advertising), and the effects held for economy (functionality-oriented) and premium (identity-oriented) cars. Importantly, the measures were uncorrelated with each other or with the control predictors. These findings are counter to a common intuition that consumers like unusual-complex designs that reflect their individuality or prototypic-simple designs that are functional.

"Half the Thrill is in the Chase: Twisted Inferences from Embodied Cognitions"
Aparna Labroo and Jesper Nielsen

Journal of Consumer Research, 37(1), 143-158, (2011) 

Do our bodies control our minds? That people approach positive outcomes is not surprising, but do people also infer an outcome is rewarding from their bodily sensation of approaching it, and does this positivity transfer indirectly to other outcomes linked in memory to the original outcome? We posit that, because people usually approach reward, they mistakenly infer that approach must equal reward. Thus, a sensation of approach, even toward a negative outcome, makes them feel more positively toward the negative outcome and associated outcomes. Experiment 1 demonstrates a positive effect of embodied movement in space toward an otherwise aversive product. Experiments 2 and 3 additionally show positive effects of psychological movement in time, using evaluative conditioning procedures, to associated stimuli in memory. Implications for downward spirals in habit formation—the idea that approaching one bad habit might increase liking of other bad habits—and affect regulation are discussed.

"Scope Insensitivity Justifications and the 'Mere Token' Effect"
Oleg Urminsky and Ran Kivetz 

Journal of Marketing Research, 48(2), 282-295, (2011)

Decisions often involve trade-offs between a more normative option and a less normative but more tempting option. We propose that the intrapersonal conflict evoked by such choices involving incompatible goals can be resolved through scope insensitive justifications. We describe one such mechanism, the "mere token" effect, a new phenomenon in decision making. We demonstrate that adding a certain and immediate "mere token" amount to both options increases choices of the later-larger option in intertemporal choice and of the riskier larger option in risky choice. This effect is found to be scope insensitive, such that the size of the "mere" token amount does not moderate the effect. We show that intrapersonal choice conflict underlies the mere token effect and that reducing the degree of conflict by increasing the psychological distance to the choice outcomes debiases the effect. Further, we show that the mere token effect is enhanced (a) when opposing goals in choice are made salient and (b) when the choice options represent a starker contrast that generates greater conflict. We empirically rule out alternative explanations, including diminishing marginal utility, normative and descriptive utility-based models, liquidity constraints and naïve diversification. We discuss the direct implications of the mere token effect for the marketing of financial services, and more generally, for consumer preference toward bundles and multi-attribute products.


Q
show

Research Highlights: 2010

A

"Complementarities and the Demand for Home Broadband Internet Services"
Pradeep Chintagunta, Hongju Liu, and Ting Zhu

Marketing Science, 29(4), 701-720, (2010)

Before the deregulation of digital subscriber line (DSL) services by the Federal Communications Commission (FCC) in 2005, phone companies were required to share their DSL bandwidth with independent DSL providers. Despite the large number of independent providers that entered the market, phone companies accounted for 95.3 percent of all DSL subscribers in 2005. A common explanation for this is based on supply-side factors such as the costs faced by these providers to lease phone lines from phone companies, as well as the price discounts offered by phone companies. In this paper, we look for a demand-side explanation for this market outcome. Analyzing consumer choices in the broadband category alone would lead us to the conclusion that consumers have a much higher preference for their local phone providers—a finding at odds with service awards received by independent DSL providers. Thus we look for a demand-side explanation that is based on the demand not just for broadband services but also for related services such as cable TV and local phone. We find evidence of strong complementarities between the consumption of broadband and of those related categories. The main source of such complementarities, in our data, is the benefits to consumers from having a single provider for multiple services. We then carry out counterfactual experiments assuming that there are no changes in the regular prices of the various services. Our results indicate that the share of phone companies in the broadband market would have been 43 percent smaller without complementarities stemming from such a single-provider effect, whereas shutting off the state dependence effects would have reduced their share by 30 percent, and shutting off the effects of price discounts on the DSL + local phone bundle would have resulted in their share declining by 21 percent. 

"The Effect of Signal Quality and Contiguous Word of Mouth on Customer Acquisition for a Video on Demand Service"
Pradeep Chintagunta, Puneet Manchanda and Sungjoon Nam

Marketing Science, 29(4), 690-700, (2010)

This paper documents the existence and magnitude of contiguous word of mouth effects of signal quality of a video on demand (VOD) service on customer acquisition. We operationalize contiguous word of mouth effect based on geographic proximity and use behavioral data to quantify the effect. The signal quality for this VOD service is exogenously determined, objectively measured and spatially uncorrelated. Further, it is unobserved to the potential subscriber and is revealed post-adoption. For a subscriber, the signal quality translates directly into the number of movies available for viewing, thus representing a part of overall service quality. The combination of signal quality along with location and neighborhood information for each subscriber and potential subscriber allows us to resolve the typical challenges in measuring causal social network effects.
We find that contiguous word of mouth affects about 8 percent of the subscribers with respect to their adoption behavior. However, this effect acts as a double-edged sword as it is asymmetric. We find that the effect of negative word of mouth arising from poor signal quality is more than twice as large as the effect of positive word of mouth arising from excellent signal quality. Besides contiguous word of mouth, we find that advertising and the retail environment also play a role in adoption.

"The Effects of Online User Reviews on Movie Box Office Performance: Accounting for Sequential Rollout and Aggregation Across Local Markets"
Pradeep Chintagunta, Sriram Venkataraman and Shyam Gopinath
Marketing Science, 29(5) 944-957, (2010)

Our objective in this paper is to measure the impact (valence, volume, and variance) of national online user reviews on designated market area (DMA)-level local geographic box office performance of movies. We account for three complications with analyses that use national-level aggregate box office data: (i) aggregation across heterogeneous markets (spatial aggregation), (ii) serial correlation as a result of sequential release of movies (endogenous rollout), and (iii) serial correlation as a result of other unobserved components that could affect inferences regarding the impact of user reviews. We use daily box office ticket sales data for 148 movies released in the United States during a 16-month period (out of the 874 movies released) along with user review data from the Yahoo! Movies website. The analysis also controls for other possible box office drivers. Our identification strategy rests on our ability to identify plausible instruments for user ratings by exploiting the sequential release of movies across markets—because user reviews can only come from markets where the movie has previously been released, exogenous variables from previous markets would be appropriate instruments in subsequent markets.

In contrast with previous studies that have found that the main driver of box office performance is the volume of reviews, we find that it is the valence that seems to matter and not the volume. Furthermore, ignoring the endogenous rollout decision does not seem to have a big impact on the results from our DMA-level analysis. When we carry out our analysis with aggregated national data, we obtain the same results as those from previous studies, i.e., that volume matters but not the valence. Using various market-level controls in the national data model, we attempt to identify the source of this difference.

By conducting our empirical analysis at the DMA level and accounting for prerelease advertising, we can classify DMAs based on their responsiveness to firm-initiated marketing effort (advertising) and consumer-generated marketing (online word of mouth). A unique feature of our study is that it allows marketing managers to assess a DMA's responsiveness along these two dimensions. The substantive insights can help studios and distributors evaluate their future product rollout strategies. Although our empirical analysis is conducted using motion picture industry data, our approach to addressing the endogeneity of reviews is generalizable to other industry settings where products are sequentially rolled out.

"State Dependence and Alternative Explanations for Consumer Inertia"
Jean-Pierre Dubé, Günter Hitsch, and Peter Rossi

RAND Journal of Economics, 41(3), 417-445, (2010)

For many consumer packaged goods products, researchers have documented a form of state dependence whereby consumers become “loyal” to products they have consumed in the past. That is, consumers behave as though there is a utility premium from continuing to purchase the same product as they have purchased in the past or, equivalently, there is a psychological cost to switching products. However, it has not been established that this form of state dependence can be identified in the presence of consumer heterogeneity of an unknown form. Most importantly, before this inertia can be given a structural interpretation and used in policy experiments such as counterfactual pricing exercises, alternative explanations which might give rise to similar consumer behavior must be ruled out. We develop a flexible model of heterogeneity which can be given a semi-parametric interpretation and rule out alternative explanations for positive state dependence such as autocorrelated choice errors, consumer search, or consumer learning.

"What Makes You Click?—Mate Preferences in Online Dating"
Günter Hitsch, Ali Hortaçsu and Dan Ariely

Quantitative Marketing and Economics, 8(4), 393-427, (2010)

We estimate mate preferences using a novel data set from an online dating service. The data set contains detailed information on user attributes and the decision to contact a potential mate after viewing his or her profile. This decision provides the basis for our preference estimation approach. A potential problem arises if the site users strategically shade their true preferences. We provide a simple test and a bias correction method for strategic behavior. The main findings are (i) There is no evidence for strategic behavior; (ii) Men and women have a strong preference for similarity along many (but not all) attributes; (iii) In particular, the site users display strong same-race preferences (race preferences do not differ across users with different age, income, or education levels in the case of women, and differ only slightly in the case of men; for men, but not for women, the revealed same-race preferences correspond to the same-race preference stated in the users’ profile); (iv) there are gender differences in mate preferences; in particular, women have a stronger preference than men for income over physical attributes.

"The Effect of Sales Promotions on the Size and Composition of the Shopping Basket: Regulatory Compatibility from Framing and Temporal Restrictions"
Suresh Ramanathan and Sanjay K. Dhar

Journal of Marketing Science, 47(3), 542-552, (2010)

Most literature on sales promotions focuses on responses to the promoted brand. Across two experimental studies and one field study, the authors examine how sales promotions may affect the size and composition of the overall shopping basket. The authors show that the framing of the savings message on sales promotions (e.g., “Save $x” versus “Get $x Off”), the expiration date restriction cue (immediate versus future expiration), and the familiarity of brands (well-known versus less familiar) are independent primes of regulatory focus. Furthermore, such cues, when compatible with one another or with a prior regulatory focus, lead to more unrelated purchases in the store. The authors discuss the findings in the context of theory on regulatory relevance and mind-sets, and they posit managerial implications for the design of sales promotions and store positioning.


Q
show

Research Highlights: 2009

A

"Quantifying the Economic Value of Warranties in the US Server Market"
Pradeep Chintagunta and Junhong Chu

Marketing Science, 28(1), 99-121, (2009)

The authors quantify the economic value of hardware base warranties in the US server market to manufacturers, channel intermediaries, and customers. They further decompose the value of a warranty into its insurance value and its price discrimination value, which are the two main rationales for warranty provision in the server market. They use structural modeling and counterfactual experiments to accomplish the empirical task. They derive a demand model from utility maximization, which accounts for a customer’s risk aversion behavior and heterogeneity. The authors obtain their pricing model from the profit maximization behavior of manufacturers and downstream firms in indirect channels, accounting for the institutional realities in the server market. Their empirical analysis uses quarterly data from 1999 to 2004 on server wholesale prices, retail prices, and sales for direct and indirect channels in the U.S. market. They find that manufacturers and downstream firms benefit from warranty provision and from sorting across heterogeneous customers by offering a menu of warranties. Customers also benefit from manufacturer warranty provision as well as from the menu of warranties offered. The insurance value of warranties increases and the price discrimination value of warranties decreases with warranty duration.

"Brand History, Geography, and the Persistence of Brand Shares"
Sanjay Dhar, Jean-Pierre Dubé, and Bart Bronnenberg

Journal of Political Economy, 117(1), 87-115, (2009)

The authors study persistence in the geographic variation in market shares of branded goods in 34 consumer packaged goods industries across the 50 largest U.S. city-markets. Current market shares are higher in markets closest to a brand’s historic cityof- origin than in markets farthest from its city-of- origin. For six industries, they can determine the order of entry among the top brands in each of the 50 U.S. markets. The authors find an “early entry” effect on a brand’s current relative market share and perceived quality across U.S. cities. In most cases, the magnitude of this effect drives the rank-order of market shares and perceived quality levels across cities. The findings suggest that early entry generates a persistent advantage for a firm and therefore plays a role in the formation of the long-run industrial market structure of the CPG industries studied.

"Psychological Distancing: Why Happiness Helps You See the Big Picture"
Aparna Labroo and Vanessa Patrick

Journal of Consumer Research, 35(5), 800-09, (2009)

The authors propose that a positive mood, by signaling that a situation is benign, might allow people to step back and take in the big picture. As a consequence, a positive mood might increase abstract construal and the adoption of abstract, future goals. In contrast, a negative mood, by signaling not only danger but also its imminence, might focus attention on immediate and proximal concerns and reduce the adoption of abstract, future goals. The authors conducted five experiments. First they demonstrate the basic effect—that positive cues and positive mood evoke abstract construal. Then, in accordance with a construal-level account, they demonstrate that participants in a positive (vs. negative) mood view abstract goals as more important and concrete goals as less important and prefer products with abstract, future-oriented benefits. Finally, they demonstrate that by increasing abstract construal, a positive mood results in an increased adoption of whichever abstract goal is accessible. They argue that these findings are not only compatible with but also offer a new lens through which to view the mood-as-information perspective.


Q
show

Research Highlights: 2008

A

"Prominence Effect in Shanghai Apartment Prices"
Christopher Hsee, Jean-Pierre Dubé and Yan Zhang

Journal of Marketing Research, 45(2), 133-144, (2008)

A field study conducted in Shanghai identified a robust inconsistency between real estate developers' desired sales pattern (selling all apartments in a building at similar rates) and the actual sales pattern (selling good apartments faster). The authors explained this inconsistency with the prominence principle described by Tversky, Sattath, and Slovic (1988), according to which buyers, who were in a choice mode, weighed the desirability of floors more heavily than developers, who were in a matching mode when setting prices. This explanation is corroborated by controlled experiments involving potential homebuyers and professional real-estate price-setters. The research relates an intriguing anomaly originally found in paper-and-pencil surveys to a real-world issue in one of the world's most active markets. These findings also have implications for issues beyond real estate markets.