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Zero as a Special Price: The True Value of Free Products

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Abstract

When faced with a choice of selecting one of several available products (or possibly buying nothing), according to standard theoretical perspectives, people will choose the option with the highest cost–benefit difference. However, we propose that decisions about free (zero price) products differ, in that people do not simply subtract costs from benefits but instead they perceive the benefits associated with free products as higher. We test this proposal by contrasting demand for two products across conditions that maintain the price difference between the goods, but vary the prices such that the cheaper good in the set is priced at either a low positive or zero price. In contrast with a standard cost–benefit perspective, in the zero-price condition, dramatically more participants choose the cheaper option, whereas dramatically fewer participants choose the more expensive option. Thus, people appear to act as if zero pricing of a good not only decreases its cost, but also adds to its benefits. After documenting this basic effect, we propose and test several psychological antecedents of the effect, including social norms, mapping difficulty, and affect. Affect emerges as the most likely account for the effect.

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... Sin embargo, en las decisiones de coste cero, la gente no sustrae los costes de los beneficios, sino que incluso perciben los beneficios del producto más elevados. El hecho de que un producto se oferte como gratis no solo no disminuye su valor sino que se lo añade (Shampanier, Mazar y Ariely, 2007). ...
... La teoría del mapeado hace referencia a la dificultad para identificar económicamente el valor de un producto de coste cero (Shampanier et al., 2007). Esta teoría podría tener clara relación con el presente estudio al ser el producto ofrecido un bien de consumo inmaterial (un servicio en realidad) cuyo valor es difícilmente mesurable, pudiendo ser además considerado como de coste cero al darle la posibilidad a las personas de reclamar el importe de la entrada. ...
... Estos resultados tienen también relación con los efectos que el coste cero tiene en nuestra toma de decisiones. Ariely y sus colaboradores (2009;Shampanier et al., 2007) demostraron que el enfrentar a una persona a la palabra gratis se incrementaba la dificultad de que esta persona pueda estimar el valor del producto. En nuestro experimento, al ofrecer a los participantes la posibilidad de recuperar a la salida el coste monetario de la entrada, les estamos planteando en realidad asistir a un evento de coste cero. ...
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Resumen El objetivo principal que persigue el presente trabajo es mostrar empíricamente en un nuevo contexto, que el mecanismo que rige el proceso de toma de decisiones a la hora de optar por consumir bienes culturales no se ajusta enteramente a la visión racional y egoísta del ser humano propuesta por la economía clásica. Para alcanzar este objetivo se planteó un diseño experimental con tres grupos (dos experimental y uno control) a los que se les daba la opción de elegir hipotéticamente entre reclamar la devolución del dinero de la entrada a la salida de diferentes eventos culturales (decisión egoísta) o no hacerlo (decisión no egoísta). Para analizar los resultados se realizó una prueba binomial para determinar si la diferencia de proporciones entre las respuestas afirmativas y negativas eran o no significativas. Los resultados obtenidos indican que en la mayoría de las situaciones los participantes se negaban a reclamar la devolución del dinero de la entrada a la salida del evento cultural, actuando así de manera no-racional bajo la visión económica clásica. Estos resultados tendrían, a efectos prácticos, un aumento en el número de espectadores que asisten a actos culturales.
... Nevertheless, it is difficult for economics to explain extremely long waits and severe emergency room overcrowding (e.g., Roberge et al., 2003). 1 Consumer psychologists in marketing have argued that zero-price can trigger a behavioral response that creates a large discrete jump in demand. In their pioneering work, Shampanier et al. (2007) found intriguing evidence that consumers attach significantly higher utility to products at zero price. Their experiments were based on both laboratory hypothetical situations and real choices between different chocolates, Amazon gift cards, and flat-panel televisions, using college students as subjects. ...
... They examined several psychological explanations for the zero-price effect, arguing that the main cause is that the zero-price option, with no downside, evokes positive affective behavior. After Shampanier et al. (2007), several studies provided further laboratory evidence for the zero-price effect in different contexts (e.g., Palmeira, 2011;Nicolau and Sellers, 2012;Hossain and Saini, 2015;Baumbach, 2016;Mazar et al., 2017). ...
... On the contrary, when consumers evaluate a utilitarian product (which is affect-poor), they are more likely to be driven by the normative rational cost-benefit calculus and thus, their affect feeling may be harder to trigger by the zero-price effect. Therefore, if affective appraisal is the main driving force (as argued by Shampanier et al., 2007), the zero-price effect should be less pronounced for utilitarian products. The experimental results reported by Hossain and Saini (2015) are consistent with this theory; they found the zero-price effect to be significantly This is the author's accepted manuscript without copyediting, formatting, or final corrections. ...
... Following the law of demand, lower prices are more attractive to consumers, so a zero price ostensibly should generate the highest demand. Extant literature has demonstrated that zero prices, compared to low, nonzero prices, can significantly increase demand for a product (Baumbach, 2016;Nicolau & Sellers, 2012;Shampanier et al., 2007). The boosting effect of zero pricing on consumer demand is driven primarily by consumers' positive affect, which is markedly enhanced when the price is zero (vs. ...
... The boosting effect of zero pricing on consumer demand is driven primarily by consumers' positive affect, which is markedly enhanced when the price is zero (vs. low, nonzero;Shampanier et al., 2007). Consumers' positive reactions extend to pseudo-free offers-those that are presented as free but require certain concessions (e.g., completing a customer survey, providing personal information, or watching an ad; Dallas & Morwitz, 2018). ...
... Almost all extant findings indicate that a zero price outperforms other promotional prices on various measures, including the demand for the promoted product (e.g., Ma et al., 2018;Nicolau & Sellers, 2012;Shampanier et al., 2007) and the willingness to pay (WTP) for the product after the promotion ends (e.g., Palmeira & Srivastava, 2013). The benefits of a zero price can be elicited by both truly free offers (e.g., Baumbach, 2016;Hossain & Saini, 2015;Palmeira & Srivastava, 2013;Shampanier et al., 2007) and pseudo-free offers (Dallas & Morwitz, 2018;Hüttel et al., 2018), and with both single products (Hossain & Saini, 2015;Shampanier et al., 2007) and multi-component products (e.g., Chandran & Morwitz, 2006;Ma et al., 2018;Nicolau & Sellers, 2012;Palmeira & Srivastava, 2013). ...
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Prior literature has demonstrated the power of zero pricing to boost consumer demand, but the current research shows a novel "boomerang effect": a zero (vs. low, nonzero) price can lower demand when the offer comes with high incidental costs (e.g., the time cost in commuting to an offline class; the physical risk of getting a new vaccine). Five studies show that zero pricing, relative to low pricing, has a boosting (boomerang) effect on demand when incidental costs are low (high). The diverging effects of zero pricing on demand are explained by a dual-process model with a positive affective pathway and negative scrutiny pathway. Zero pricing triggers both positive affect and cognitive scrutiny of incidental costs; when incidental costs are high, the scrutiny pathway overrides the affective pathway and decreases demand. The finding has managerial implications as incidental costs often vary widely between marketing channels and over a product's life cycle. Supplementary information: The online version contains supplementary material available at 10.1007/s11747-022-00842-1.
... The notion of a free mentality, or "free lunch" mentality, is discussed as a problem of various information goods, such as freemium games (Hamari et al., 2020), online music (Lin et al.,2013), software (Niemand et al., 2015), video streaming (Niemand et al., 2019) and online clip art content (Dou, 2004). Research on that subject tackles questions of affect induced benefit inflation for free offers, i.e., the "zero price effect" (Shampanier et al., 2007), the existence of free alternatives (Dou, 2004), perceived value (Hamari et al., 2020;Yan & Wakefield, 2018), convictions on the inherent value of information goods (Lin et al., 2013), and habits (Chyi, 2012;. For example, advertising-based business models have heavily subsidized the recipient market in the past and mostly refrained from pricing the recipient side in the various sub-markets (radio, television, Internet). ...
... Therefore, the audience is trained to feel entitled to consume those goods for free. Additionally, to price a good which was formerly available for free invokes loss aversion (Kahneman & Tversky, 1979;Shampanier et al., 2007;Li & Cheng, 2014), meaning the disproportional effect of perceived losses relative to a reference price, which has been established at zero for many goods. ...
... The existence of and preference for free alternatives (Dou, 2004 or other effects related to a price of zero (Shampanier et al., 2007;Niemand et al., 2019) must be conceptually distinguished from free mentality as such. While free alternatives exert economic pressure on all feebased competitors, and the zero price effect is based on the conflicting effects of free mentality and price-quality inference (Niemand et al., 2019), free mentality as such refers to the consumer's firm conviction that he or she does not have to pay for certain goods, i.e., "a user's perception that all content should be free and available to all users" (p. 6). ...
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The advertising-based business model of journalism is under massive economic pressure. Thus, paid online content is becoming increasingly important for publishers. However, most consumers refuse to pay for online content at all. “Free mentality,” the consumer’s aversion to accept any price point other than zero, is discussed as one major reason. This paper is the first to empirically examine whether free mentality is associated with a reluctance to pay for online news. For this purpose, data of a comprehensive user survey in Germany (n = 1,004) was analyzed via ordered probit models and path analysis. Additionally, moderating effects with regards to free mentality and perceived value were examined. Results confirm low paying intent in the public and the role of free mentality therein. Beyond, free mentality significantly moderates the effect of perceived value on paying intent. The ideal of the Internet as disseminator of free ideas has a strong indirect effect on paying intent. Additionally, mandatory public service media fees in Germany pose another possible context-dependent rationale. This implies that the audience tends to perceive generic online goods akin to public goods. Thus, publishers must focus on the paying minority and the creation of added value via sufficient differentiation.
... A number of studies show that an attribute with a value of zero may affect choice in a manner that goes way beyond standard cost-benefit analysis. For example, Shampanier et al. (2007) presented students with two chocolates: one of high quality and one of low quality. The price difference between the two chocolates was held constant across treatments (27 cents to 2 cents, 26 cents to 1 cent, or 25 cents to 0), but in the treatment in which the low-quality chocolate's price hits zero, the proportion of students who chose it peaked dramatically. ...
... 4 Palmeira (2010) examines the effect of zero with attributes other than price. He argues that, although a free offer, as in Shampanier et al. (2007), generates affect, a value of zero in other attributes does not. For other attributes, he claims, zero "takes the reference away" (Palmeira 2010, p. 18) and, hence, makes comparisons with other alternatives along that attribute more difficult. ...
... Predictions may be generated based on whether the dimension is desirable or undesirable, a feature that is normally very easy to identify. Taking price as an example, our model allows formalizing the virtue of affect expressed in Shampanier et al. (2007): it is the extra weight placed on an undesirable dimension when it carries a value of zero. Lastly, in Study 2, we show that the channel of turned-on dimensions may reverse preferences over two options depending on the characteristics of a third option. ...
Article
Could introducing a tiny interest rate on positive balances of checking accounts affect investment decisions? We suggest, counterintuitively, that it might decrease allocations to checking accounts and increase riskless investments with higher returns. This violation of monotonicity is a potential outcome of a novel behavioral phenomenon that we formalize and investigate experimentally. It posits that even a small interest rate highlights or turns on the safe gains dimension, bumping up its decision weight while shrouding other considerations, such as liquidity. Consequently, choices may shift from the most liquid option, the checking account, to safe investments with superior returns. Our exploration of this phenomenon covers three different choice environments: investment decisions, social preferences, and choice under uncertainty. This paper was accepted by Yan Chen, behavioral economics and decision analysis.
... We chose to provide completely free charging as opposed to reductions in charging costs for several reasons. A relatively larger impact can be expected from a free offer versus a simple reduction of costs of a similar amount (Shampanier et al., 2007) and variable or dynamic pricing runs the risk of eliciting negative consumer reactions (Haws and Bearden, 2006). Finally, the administrative effort of calculating and distributing minor savings was deemed too large considering the already minor expense of a single charging process (reported as around 5 Euros by the charging provider). ...
... It is noteworthy that such a relatively small amount of savings was able to move persons into the desired direction when considering the time and effort of undertaking an extra charging process; especially in light of the typical socio-demographic profile of BEV owners (predominantly high-income, multi-car households, see Kumar and Alok, 2020;Priessner et al., 2018). This could be attributed to the previously mentioned findings that a free offer has a much stronger impact than a mere reduction of cost (Shampanier et al., 2007). As an alternative interpretation, it also supports the idea that the conversational nature of the incentive might play a role more than the value itself, in the sense that the free offer transmits a priority and urgency for the desired action (Grice, 1975;Kacperski and Kutzner, 2020). ...
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Battery electric vehicles generate a significant share of their greenhouse gas emissions during production and later, when in use, through the energy used for charging. A shift in charging behavior could substantially reduce emissions if aligned with the fluctuating availability of renewable energy. Financial incentives and environmental appeals have been discussed as potential means to achieve this. We report evidence from a randomized controlled trial in which cost-free and “green” charging was advertised via email notifications to customers of a charging service provider. Emails invited to charge during midday hours (11:00 to 15:00) of days with high predicted shares of renewable energy. Results show a significant increase in the number of charging processes in the critical time, and in the amount of energy charged (kWh), despite only marginal monetary savings of 5€ on average. A further increase in kWh charged was observed on weekends. Under the assumption that these charging processes replaced regular overnight charging at home, this represents reduction in CO2 emissions of over 50%.
... Their findings have become a theoretical cornerstone of a wide range of subsequent research in various disciplines, and there are 1216 Google Scholar citations for Heyman & Ariely (2004) as of February 2022 (Bowles & Polanía-Reyes, 2012;Gneezy et al., 2011;Lacetera & Macis, 2010;Newman & Shen, 2011;Shampanier et al., 2007;Yam et al., 2012). The asymmetry in the effectiveness of big compensa-HI, WFC, YKN, LHM, and MSW contributed equally and are joint first authors. ...
... gfeldman@hku.hk a b Imada, H., Chan, W. F., Ng, Y. K., Man, L. H., Wong, M. S., Cheng, B. L., & Feldman, G. (2022). Rewarding More Is Better for Soliciting Help, Yet More So for Cash Than for Goods: Revisiting and Reframing the Tale of Two Markets With Replications and tions compared to small ones between cash and non-monetary goods has guided people working in diverse fields, such as marketing (Shampanier et al., 2007) and conservation (CIFOR, 2005;Wunder, 2007). ...
Article
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Heyman and Ariely (2004) demonstrated that the expected effectiveness of soliciting help varied depending on the "market", a money market represented by cash rewards versus a social market represented by goods as rewards. They showed that, as cash rewards increase, individuals expected others to be more willing to help, yet, when offering social goods as rewards such as candy, expected willingness to help was insensitive to rewards’ monetary worth. We conducted two pre-registered replication studies (total: N = 3302, MTurk/Prolific) of Study 1 in Heyman and Ariely (2004) and found support for one of their main claims that people are more sensitive to worth when the reward is cash than goods. However, the rewards' monetary worth impacted expected willingness to help even in social markets, deviating from the original findings. Extensions further compared between-subject and within-subject designs, examined perceived affect (joy and regret), and added a new control condition. We concluded that higher compensation is generally perceived as better when soliciting help, yet more so for the money market cash rewards than for the social market goods rewards. All materials, data, and code are provided on https://osf.io/y9p7u/
... First, we study impacts at the no-fee-to-fee margin, rather than impacts of financial aid or other changes to existing fees. The effect of introducing fees might differ from that of modifying financial aid due to non-linearities, because of general equilibrium responses, because the zero price might be special (Shampanier, Mazar, and Ariely, 2007), and because information costs likely play a much larger role for financial aid (e.g. Bettinger et al., 2012;Barr and Turner, 2018;Dynarski et al., 2018). ...
... 13 Alternatively, the fees might have triggered a sunk-cost effect that raised students' psychological cost of failing, thus motivating them to study harder (Thaler, 1980;Arkes and Blumer, 1985;Ketel et al., 2016). 14 Yet another possibility is that the move of the (salient part of the) cost of studying above zero prompted a change in behavior, in line with previous literature documenting the role of zero as a "special price" (Shampanier, Mazar, and Ariely, 2007). ...
... Interestingly, among drivers who intended to, and actually drove through the toll road, a toll-payment description (group b) led to slightly higher time savings estimations (M = 14.6 min) than a participation-fee description (group a; M = 12.6 min, t(187) = 1.580, p < 0.06), making the return-for-payment account unlikely. Instead, this pattern suggests a zero price effect (Shampanier et al. 2007), according to which people tend to exaggerate a free product's benefits. Drivers who perceived their toll to be paid by the experimenter may have construed their trip as a free ride, and consequently exaggerated their toll-road benefits. ...
... Consequently, they exaggerate the benefits of the toll alternative, to further differentiate it from the non-toll alternative, which, in turn, justifies their route choice (to themselves and/or others). The zero price effect, i.e., people's tendency to exaggerate the benefits of a free product (Shampanier et al. 2007), also emerged in our experimental setting, and may have been stronger than the return-for-payment effect on subjective time savings. Thus, future research may examine the return-for-payment account by employing low versus high toll payment, consequently avoiding the powerful effect of a free ride. ...
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Travel time is considered a main factor in travel demand modeling, taken almost exclusively in its objective form. Given that people base their decisions on perceptions rather than on objective attributes, this study aims to examine whether forecasting could benefit from the inclusion of subjective time. A second objective is to test and disentangle drivers’ tendency to estimate toll trips as shorter than non-toll trips. In a field experiment, shoppers departing a mall described their intended route and an alternative route, one of which via a nearby toll road. Participants provided time estimates for the two routes. Objective times were collected via smartphone tracking apps and Waze. All 386 participants were paid 10 NIS. To test the effects of toll self-payment, some participants were told that this sum was to cover the toll payment, and others that it was a participation fee. Consequently, some participants who had not intended to drive via the toll road were paid to do so. Results showed that drivers who intended to drive via the toll road exaggerated their time savings compared to drivers who did not intend to drive it but eventually did, suggesting drivers’ time estimates reflected an attempt to justify their route choice. Self-payment decreased estimated toll time savings. Drivers’ toll-route choice was estimated using binomial logit models, revealing better fit for models based on estimated, rather than objective, time. We concluded that estimated time data entails unique valuable information regarding drivers’ preferences, rendering its integration in toll-route modeling constructive and beneficial.
... Further, as most digital goods are storable at low costs, users could easily stockpile promoted goods at low prices and consume out of this inventory in future high price periods. By this view, sales can become expensive giveaways, essentially serving to generate unprofitable intertemporal demand substitution, 1 The difficulty of converting free users to paying ones could arise from a fixed cost to the user of setting up payment (e.g., the customer has to enter his credit card details and get verified) or by the special significance of a "zero price" in consumer's minds (Heyman & Ariely, 2004;Shampanier et al., 2007;Ascarza et al., 2012). moving a purchase that would otherwise have occurred at a high-price future or past to a low-price present featuring a sale. ...
Article
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The “freemium” model for digital goods involves selling a base version of the product for free, and making premium product features available to users only on payment. The success of the model is predicated on the ability to profitably convert free users to paying ones. Price promotions (or “sales”) are often used in freemium to induce this conversion. However, the causal effect of exposing consumers to such inter-temporal price variation is unclear. While sales can generate beneficial short-run conversion, they may be harmful in the long-run if consumers inter-temporally substitute purchases to periods with low prices, or use them as signals of low product quality. These long-run concerns may be accentuated in freemium apps, where the base version is sold for free, so that sales form extreme price cuts on the overall product combination. We work with the seller of a free-to-play video game to randomize entering cohorts of users into treatment and control conditions in which promotions for in-game purchases are turned on or off. We observe complete user behavior for half a year, including purchases and consumption of in-game goods, which, in contrast to much of the extant literature, enables us to assess possible substitution over time in consumption directly. We find that conversion and revenue improve in the treatment group; and detect no evidence of harmful inter-temporal substitution or negative inferences about quality from exposure to price variation, suggesting that promotions are profitable. We conjecture that the zero price of the base product that makes its consumption virtually costless, combined with the complementarity between the base product and premium features can help explain this. To the extent that this holds across freemium contexts, the positive effects of promotions documented here may hold more generally.
... The levels for monthly out-of-pocket cost attribute were $10, $40, $120, $200 and calibrated to non-digital pill organizer, mobile app, smart pill dispenser and pill embedded with IEM sensor, respectively. Non-zero dollar amounts were defined for monthly out-of-pocket cost attribute levels as previous studies have shown that free products were not valued the same as non-free goods 38 (See Figure 1). The DCE was designed using the AlgDesign software package for R based on the D-efficiency criteria. ...
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Background Adherence to antipsychotic medication is critical for bipolar disorder (BPD), major depression (MDD) and schizophrenia (SCZ) patients. Digital tools have emerged to monitor medication adherence along with tracking general health. Evidence on physician or patient preferences for such tools exists but is limited among caregivers. The study objective was to assess preferences and willingness-to-pay (WTP) for medication adherence monitoring tools among caregivers of SMI patients. Methods A web-based survey was administered to caregivers of adult SMI patients. Twelve discrete choice questions comparing adherence monitoring tools that varied across two attribute bundles: (1) tool attributes including source of medication adherence information, frequency of information updates, access to adherence information, and physical activity, mood, and rest tracking, and (2) caregiver monthly out-of-pocket cost attribute were administered to caregiver respondents. Attributes were parameterized for both digital and non-digital tools. Random utility models were used to estimate caregivers’ preferences and WTP. Results Among 184 study-eligible caregivers, 57, 61 and 66 participants cared for BPD, MDD, and SCZ patients, respectively. Caregivers highly preferred (odds ratio (OR): 7.34, 95% confidence interval (CI): 5.00–10.79) a tool that tracked medication ingestion using a pill embedded with an ingestible event market (IEM) sensor and tracked patients’ physical activity, mood, and rest than a non-digital pill organizer. Additionally, caregivers were willing to pay $255 per month (95% CI: $123–$387) more for this tool compared to a pill organizer. Conclusion Caregivers of SMI patients highly preferred and were willing to pay more for digital tools that not only measures medication ingestion but also tracks general health.
... This sale mechanism has two main positive aspects: (a) it allows the customer to have a first idea of what the product is about with no money down, which (b) results in a large market penetration. However, the premium version (the one that generates revenues), typically does not have a large market penetration [11,12,13,14,15,16,17,18] (i.e., only a small fraction of the free version customers decide to switch to premium). Since the conversion rate from Free to Premium is typically very small, many companies try to make some money by selling advertisements in the free version. ...
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In today's economy, selling a new zero-marginal cost product is a real challenge, as it is difficult to determine a product's “correct” sales price based on its profit and dissemination. As an example, think of the price of a new app or video game. New sales mechanisms for selling this type of product need to be designed, in particular ones that consider consumer preferences and reality. Here we introduce an auction model where buyers continuously place bids and the challenge is to decide whether or not to accept them. The model does not include a deadline for placing bids, and exhibits self-organized criticality; it presents a critical price from which a bid is accepted with probability one, and avalanches of sales above this value are observed. This model is especially interesting for startup companies interested in profit as well as making the product known on the market.
... Beyond freemium, the availability of a free option reduces consumers' quality fit uncertainty (Matt & Hess, 2016) and it can lead them to perceive the service to be of higher net value to them (Shampanier et al., 2007). However, offering products for free also entails potential risks for vendors. ...
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Social computing has transformed the content industry. Content providers have changed from providing merely content to offering social content experiences that allow users not only to passively consume content but also to actively participate. As the latest development, social live streaming services (SLSS) have emerged that enable so-called co-interactive behaviour, i.e., the live interplay between users while co-experiencing content. Yet, it remains unclear how co-interactive behaviour affects the monetisation of social live content. Based on a data set of 868,940 users from 59 gaming channels of the freemium-based SLSS Twitch, we empirically show that co-interactive behaviour has a stronger effect on users' willingness to subscribe (WTS) than passive and active behaviour. Since we find that a user's reciprocated interactions also directly increase other users' WTS, our results call for dismantling the current dichotomy of user participation and social influences in IS research. We suggest a social-experiential perspective that integrates social influences as an inherent part of users' participation experiences. This novel interactive second-person perspective contributes to research on user engagement and value capture on social content platforms, and it allows SLSS providers to obtain a more precise picture of user value to better develop or adapt their monetisation strategies.
... This could be one of the reasons why farmers are not using zinc in their fields even when it is free and the probability of a farmer using it has a small but significant negative association with the distance to the fertilizer outlet. The demand for a subsidized product is liable to drop drastically when its price is raised even slightly above zero (Shampanier et al.,2007). Although the exercise of eliciting the true willingness to pay for zinc could be misleading due to a tendency to anchor valuations around the subsidized price (zero), in an incentive compatible experimental auction, Fishman and others found similar values of the willingness to pay for zinc among paddy growers in the state of Bihar (Fishman et al., 2016). ...
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Corona virus disease 2019 (COVID-19) caused by severe acute respiratory syndrome corona virus 2 (SARS-CoV-2) represents the biggest current health challenge for the society. At the moment, the therapeutic strategies to deal with this disease are only supportive. It is well evident that zinc (Zn) possesses a variety of direct and indirect antiviral properties, which are realized through different studies during the course of time. Administration of Zn supplement has a potential to enhance antiviral immunity, both innate and humoral, and to restore depleted immune cell function or to improve normal immune cell function, particular in immune-compromised or elderly patients.In recent years, the increasing zinc (Zn) deficiency problem has garnered attention and appears to be the most serious micronutrient deficiency along with vitamin A deficiency. The concentration of Zn in cereal crops is inherently very low and growing cereals on potentially Zn-deficient soils further decreases grain Zn concentrations. It is, therefore, not surprising that high Zn deficiency in humans occurs predominantly on areas where soils are deficient in plant-available Zn. Biofortification (enrichment) of crops with Zn and breeding new cereal genotypes for high grain Zn concentration is the most realistic and cost-effective strategy to address this problem. However, this strategy is a long-term one, and the size of plant-available Zn pools in soils may greatly affect the capacity of Zn-efficient (biofortified) cultivars to take up Zn and accumulate it in grains. Therefore, application of Zn-containing fertilizers represents a quick and effective approach to biofortify cereal grains with Zn. It is obvious that enrichment of widely applied fertilizers with Zn and/or foliar application of Zn fertilizers appear to be a high priority with the strongest potential to alleviate Zn deficiency-related problems in India. A Government action and policy plan for enrichment of selected major fertilizers with Zn is required urgently.
... Free Bias: Consumers underweight the non-monetary costs of acquiring goods or services with a zero monetary price (Shampanier, Mazar, andAriely 2007, Hoofnagel andWhittington 2014). As SNS typically set the monetary price of their service at zero, users will underweight the cost of granting SNS access to their data. ...
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Social Networking Services provide services in return for rights to commercialize users' personal data. We argue that what makes this transaction permissible is not users' autonomous consent but the provision of sufficiently valuable opportunities to exchange data for services. We argue that the value of these opportunities should be assessed for both (a) a range of users with different decision-making abilities and (b) third parties. We conclude that regulation should shift from aiming to ensure autonomous consent towards ensuring that users face options that they will use to advance individual and common interests.
... In addition, the effectiveness of this tax may also be due to its "salience" (Bordalo et al., 2013;Chetty et al., 2009), since it is applied to a good that is not the true object of the purchasing activity but is rather instrumental to it and demanded separately. Besides, this salience effect might be amplified by the fact that it involves a good that was previously free (Shampanier et al., 2007). ...
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In 2008, the behavioral economist Richard Thaler and the legal scholar Cass Sunstein published a book in which they advocated a novel approach to public policy based on the notion of a “nudge.” Roughly speaking, a nudge is an intervention in the decisional context that steers people's decisions by acting on their cognitive biases. The notion of a nudge generated an intense debate across different disciplines and proved popular with many policy makers around the world. The present article reviews the debate and research on nudges by focusing on three main dimensions: (1) the exact definition of nudges; (2) the justification of nudge policies, with a focus on “libertarian paternalism”; and (3) the effectiveness of nudges, both over time and in comparison with standard policies.
... Participants then reported their immediate affective reactions and perceptions of benefits and risks of the data disclosure. We measured immediate affective reactions using the picture-based 5-point scale of Shampanier et al. (2007), ranging from ☹ (1 = negative) to (5 = positive), which is well-suited to capture immediate affect (Gable and Harmon-Jones 2008;Lang et al. 1993). Moreover, we assessed perceived benefits of the data disclosure using the utilitarian benefit scale (α = .89) of Voss et al. (2003). ...
Thesis
Over the last decades, ongoing advancements in information technology (i.e., Internet and mobile devices) have expanded a firm’s ability to communicate and interact with consumers and hence, create the potential of building sustainable relationships. Tailoring offerings through (1) consumer-initiated customization and (2) firm-initiated personalization is considered a key driver of long-term consumer relationships. As technologies continue to evolve, the opportunities for tailored marketing expand and enable new technology-driven business models that help to leverage customization and personalization and strengthen customer relationships in the era of the digital economy. Across three independent essays, the purpose of this dissertation is to answer the overarching research question of how innovative technology-driven business models versus traditional business models in the domains of customization and personalization influence consumer behavior. Thereby, this dissertation contributes to an understanding of challenges and opportunities of innovative customization and personalization business models with the ultimate goal of enabling their successful diffusion in the marketplace. Specifically, in Essay 1 and Essay 2, I investigate an innovative business model located in the realm of customization, that is, internal product upgrades (i.e., offering fee-based access to originally built-in, but deliberately restricted, optional features). Using a conceptual approach, Essay 1 provides a framework for understanding how internal product upgrades will likely influence consumers’ responses. As such, it outlines evolving challenges and opportunities of internal product upgrades and derives questions for future research. In Essay 2, I use an empirical approach to examine pitfalls of internal product upgrades in the product usage phase. Drawing on research on normative expectations and perceived ownership, this essay reveals that consumers respond less favorably to internal (vs. external) product upgrades and investigates managerially relevant boundary conditions. Finally, Essay 3 creates novel insights into a business model in the domain of personalization. This essay examines how the increasingly prevalent data disclosure practice of firms engaging in a network with other firms to exchange consumer data, which we denote as Business Network Data Exchange (BNDE), influences consumers’ privacy-related decision-making. In particular, this essay shows that consumers are less likely to disclose personal data in BNDE (vs. traditional dyadic) data exchange settings and that immediate affective reactions are crucial in explaining consumers’ privacy-related decision-making. Within this dissertation, I make substantial contributions at a more general level to literature on customization and personalization by comparing innovative business models to established ones. At the individual essay level, I extend existing research in the domains of product feature modifications, norm violations, and privacy-related decision making. Moreover, this dissertation provides actionable implications for managers who are facing the decision to transform their established business model into an innovative technology-driven one.
... При данном эффекте потребительский спрос намного выше при «бесплатном продукте» (или низкой его стоимости). Для представителя из неоклассической теории небольшая разница в ценах должна обеспечить такое же изменение стимула к выбору продукта, но «эффект нулевой цены» показывает обратное (Shampanier et al., 2007). Стоит отметить, что ценовые стратегии компаний строятся еще на том, что цены у потребителей отождествляются с качеством товара/услуги, поэтому иногда потребители отдают предпочтение более дорогим товарам (Shiv et al., 2005). ...
Article
Digitalization and the rapid development of society determine the need to adapt legislation and law enforcement practice to the requirements of the digital age. Antitrust policy is also changing and developing tools that allow timely response to the challenges of the digital economy. One such tool is behavioral economics, which is becoming increasingly important in today’s digital environment, and allows regulators to be flexible and contribute to the achievement of the main goals of competition law — to maintain a competitive state of the market and avoid the concentration of excessive power in the hands of one economic entity.The practice of applying behavioral economics by antitrust authorities is becoming more extensive, as there is a large pool of data in the digital environment, including information about consumers, which can be used by companies to influence users, as well as lead to unfair competition. Thus, the paper will study the issue of using behavioral economics in terms of consumer choice by antitrust authorities in order to identify possible behavioral insights of consumers that affect the correct establishment of product markets and the identification of competition law violations by companies.Applying the legal doctrinal approach, the descriptive method, and the comparative law method makes it possible to establish the issue’s relevance in different countries and the prospects and trajectories of the usage of behavioral economics in antitrust practice.As a result of the study, a global trend has been established in the application of behavioral economics by antitrust authorities both in determining the boundaries of commodity markets and in detecting violations of antitrust laws. It is concluded that the use of such a tool will continue, as it contributes to the timely adaptation of existing antitrust laws to the challenges of the digital age, contributes to the achievement of competition law goals, and creates a thriving competitive environment.
... The coefficients of the research variable in Table 6 are all positive and significant, Thus, confirm our findings above. Shampanier, Mazar, and Ariely (2007) defined the zero-price effect. The zero-price effect means that a free product is attractive enough for users to give up another preferred alternative product because zero price conveys the idea of no cost and increases perceived value. ...
Conference Paper
Full-text available
Few studies thus far have examined add-on services associated with mitigating hotel location disadvantages. Drawing on the Elaboration Likelihood Model, we in this study consider the variety of transport amenities as a peripheral cue and propose an econometric model that explores the impact of the transport amenities on customer satisfaction. We estimate the model using 187447 reviews assembled from a well-known online travel community in China. The results show that the variety of transport amenities has a significant positive impact on customer satisfaction. Furthermore, we find that the travelers’ type and transport convenience have a moderating effect on this relationship. From the perspective of the three-factor theory, we further reveal that the transport amenity is a basic factor for business travelers but an excitement factor for leisure travelers. A variety of robustness tests show that the conclusion of this study is robust.
... This is important for the modern online retail environment, in which frequent and varied discount campaigns are a key component of both consumer expectations and digital marketing strategy (RetailMeNot, 2018). And given that consumers are known to exhibit heterogeneous response to different types of discounts (Broeder and Derksen, 2018;Chen et al., 2012;Cao et al., 2018;Ahmad and Callow, 2018;Shampanier et al., 2007), there is considerable value in the ability to use a generic, parsimonious, and effective targeting framework in an ad hoc fashion across various marketing campaigns. ...
Article
Randomized experiments—often called A/B tests in industrial settings—are an increasingly important element in the management of many organizations. While some firms have long had both the managerial and technical know-how to use experiments for making key decisions, new forms of software and internet infrastructure have dramatically lowered the cost of conducting A/B tests online, opening up the practice to an entirely new set of organizations. This dissertation studies the practice of A/B testing among this new wave of practitioners, characterized primarily as e-commerce businesses that have adopted new forms of low cost, easy to use, third-party experimentation software. The first two chapters of this document study A/B testing as its own distinct phenomena in digital business, answering questions about the prevalence of p-hacking among e-commerce practitioners and the nature of how firms use A/B testing software in the real world. The final chapter demonstrates how e-commerce firms can use A/B tests and recent developments in causal machine learning for improved customer targeting and price discrimination. As a whole, this work demonstrates the growing importance of A/B testing and causal reasoning as a key factor in the future of managerial decision making.
... Recognizing the importance of preserving the print subscriber base, to the extent possible, most newspapers in the United States now bundle free access to digital newspapers with print subscriptions. While it is well-known that consumers rarely take full advantage of products especially when they are offered for free (Shampanier et al., 2007), bundling free access to digital news with print subscriptions has been shown to provide a tangible subscriber retention benefit for publishers . In fact, print subscribers, who avail of such unlimited (free) access to digital news, end up delaying their subscription termination decisions, thereby contributing 7-12% higher revenues for newspapers. ...
Article
Full-text available
In the last two decades, the U.S. news industry has undergone significant disruption, which resulted in nearly a 66% drop in overall revenues. Such a monumental decline in subscription and advertising revenues has led news publishers to experiment with new revenue generation strategies. Some of these strategies, such as instituting a paywall on the newspaper's website and deploying a freemium business model have gained in popularity due to their promise of generating additional subscription and advertising revenue. However, these strategies limit readers' access to news, thereby contributing to news becoming a scarcer commodity. In contrast, alternative strategies such as reader-focused fundraising events aim to increase revenue organically by educating readers about the cost and value of quality journalism, with little implication for news scarcity. In this chapter, we survey several of these contemporary digital news monetization strategies with the goal of assessing the sustainability of scarcity-driven strategies. We offer conjectures about the conditions under which scarcity-driven strategies may be profitable relative to alternative monetization strategies and share some predictions about upcoming trends in the news industry.
... The main concern here is the possibility that our control and treated groups are especially motivated towards the environment and waste sorting. The results by Shampanier et al. (2007) suggest that zero-price objects can be a good incentive for attracting participants. In line with their findings, periodic field visits indicated that the upfront unconditional reward of receiving a recycling kit was a powerful tool for attracting participants independently of their environmental concern (the small bin can indeed be used for alternative purposes different than recycling bio-waste). ...
Preprint
Full-text available
Fighting climate change requires citizenship participation in pro-environmental activities. Behav-ioral mechanisms can help in promoting such activities. Exploiting a novel technology that records real-time data on individual participation in waste-sorting, we run a randomized controlled trial to evaluate the effects of offering the opportunity to sign a soft commitment. The treatment increased participation in waste sorting by 7-8 percentage points (0.23 s.d.). The effect operates through the extensive margin (starting to recycle) while it does almost not affect the intensive margin (adherence to recycling). The effect persists after more than one year. We relate these results to habit formation. JEL: D91, H41, Q50
... An anecdotal example of the effect of 'free' comes from a major online retailer, which introduced free shipping in most of the European countries in which it traded, but mistakenly only reduced shipping prices to one French franc in France. While the number of orders increased dramatically across Europe, there was very little increase in sales in France (Shampanier et al. 2007). Box 1 provides a more pertinent example of how successful free promotions can be. ...
Technical Report
Consumer behaviour in the real world often differs from that predicted by economics and policy. Drawing together evidence from behavioural economics and marketing, this project sought to explore consumer behaviour relating to the purchasing of environmentally-preferable products. The project’s research findings are based on the results of a review of behavioural economics and marketing literature, and additional research with marketing professionals. Contrary to the belief of many economists, consumers very rarely weigh-up the full costs and benefits of their purchasing decisions. Instead, they are strongly influenced by emotional factors, the behaviour of other people, by habits, and by the use of mental short-cuts, which all help to speed up decision-making. Rather than being consistent, consumer preferences have also been shown to be inconsistent, changing over time and according to the situation and the way in which information is presented. In turn, while information provision and choice are important, neither necessarily leads to improved consumer decision-making or changes in consumer behaviour. A common feature of standard economic thought is the belief that when individuals make poor choices it is the result of misinformation or a lack of information. Both marketing and the behavioural sciences have proven this ‘information-deficit’ model to be deeply flawed. In part, this stems from the fact that consumers rarely search out, read or properly digest all of the information that is available to them when making a decision. More fundamentally, the model neglects the wealth of other factors that determine individuals’ behaviour. The most obvious finding to emerge from the research is that policy must take into account all of these different factors if it is to effectively influence consumer choice. An improved understanding of consumer behaviour gives policy-makers a wider range of policy instruments with which to achieve policy objectives. Used in the right circumstances, these instruments are likely to be more cost-effective than more traditional policy instruments. Policy should also remember consumer behaviour is both context- and product-specific. While the existing evidence on consumer behaviour contained in this report provides guidance on how people make choices, policy-makers need to remember that consumer responses will vary across product groups and policy areas. The six short 'policy briefs' produced to accompany this report provide the key pieces of policy-relevant information and advice on consumer behaviour in relation to purchasing (and sometimes use) of: private vehicles, white goods, consumer electronics, food and drink, utility contracts.
... Although price presentation conveys real-life situations, price-related priming affects perceived value. If the price cue is removed or the goods are presented at zero price value, perceptions of different goods are equalized (Shampanier, Mazar & Ariely, 2007), unless they hold strong intrinsic values expressed in monetary estimations in the consumer's mind. If the digital or physical form has a default value encoded in the form, this will be evident in zero price priming. ...
... Prior studies focusing on pricing in consumer markets have underscored the widespread presence of free services in their respective contexts, offering some guidance to address the problem at hand (Bond, He, and Wen 2019;Brady, Voorhees, and Brusco 2012;Lambrecht and Misra 2017). Shampanier, Mazar, and Ariely (2007) noted that starting to invoice formerly free offerings is psychologically challenging. In consumeroriented studies, the specificity of dealing with free services has mainly been addressed in online customer relationships and digital services or often in conjunction with "freemium" business models (Bond, He, and Wen 2019;Lambrecht and Misra 2017;Pauwels and Weiss 2008). ...
Article
Full-text available
Industrial firms venturing into services is a common phenomenon in B2B markets. However, companies are often unable to monetize many such services, thus incurring high costs of service provision without benefiting from revenue generation in return. To address this critical but little-studied problem, we investigate how industrial firms can transform existing free services into for-fee offerings. Employing a theories-in-use approach, we explore leading global firms via a cross-section of B2B industries, including automotive, maritime, material handling, medical equipment, mining and construction tools, and petrochemicals. Contingent on the empirics, we precisely characterize and define free industrial services. Based on the internal and external challenges that firms face in free-to-fee (F2F) transformations, we develop a typology classifying free services into four distinct categories: Front-runners, Tugs of War, In-house Shackles, and Dead Ends. For each category, we provide empirical illustrations and identify critical actions and activities that firms deploy to successfully implement F2F transformations along the dimensions of structures, processes, people, and rewards. Thus, we offer guidance on how to overcome both external and internal challenges. Our findings demonstrate that F2F transformations of industrial services are not isolated marketing, sales, or pricing activities but require a concerted effort among all organizational functions involved.
... Designers of disincentives can take advantage of another psychological insight: People value access to free products disproportionately more than they value access to products that are so cheap as to be virtually free. 71 This means that small charges on undesirable behaviors can exert disproportionately strong effects. Disincentivizing the use of single-use plastic bags by charging for them (usually a negligible amount) has reduced their use in countries from Botswana to Ireland. ...
Chapter
This chapter comprises important economic characteristics of online platforms and their effects on competition regulation and network neutrality. Owing to the emergence of new technologies and new players, debate over online platform businesses has been increasing in many countries. Japan, where mobile operators have established an unshakable position in our daily lives and socio-economic activities, replacing the position of fixed operators, is not an exception. Facing their rapidly increasing dominance in the market, competition authorities in various countries have increased their scrutiny and started considering various disciplinary measures. After describing the general background, this chapter depicts the economic characteristics that enable online platforms to control the overall broadband ecosystem. Subsequently, it details the challenges that the emergence of platform businesses has brought to competition policy and finally discusses its impacts on neutral networks.
Article
The optimal distinctiveness literature highlights a fundamental trade‐off in product positioning within market categories: products should be distinct to minimize competition, but similar to build legitimacy. Most recently, this research has focused on understanding sources of variance in the distinctiveness‐performance relationship. We extend this literature with an examination of digital products and argue that the relationship depends on products’ revenue models: we theorize the relationship is inverted U‐shaped for paid products but U‐shaped for free products, owing to heightened privacy concerns of free product customers. We further argue that this latter relationship becomes flatter for free products that provide greater monetization transparency by publishing a privacy statement or adopting a freemium revenue approach. Hypotheses are tested using a sample of 250,000‐plus Apple App Store apps. How should firms in the digital space position their products for optimal performance? We study this question in the Apple App Store, and suggest that the optimal positioning of digital products depends on their revenue model. Paid products should be moderately differentiated from competing products. By contrast, free products benefit most from very low or very high levels of differentiation. We attribute the different performance effects of differentiation to customers’ privacy concerns over free products. Firms can partially ameliorate those privacy concerns by providing greater monetization transparency by publishing a privacy statement or by adopting a freemium revenue approach, making moderate levels of differentiation more viable. Our findings help managers align choices of positioning and revenue model, two critical aspects of the firm’s business model.
Article
This paper assembles five comments on Janiszewski and van Osselaer’s article that promotes abductive research as a way to generate new psychological theory. The review process began by asking those making comments to be part of collaborative communication between themselves and Janiszewski and van Osselaer. The five comments arising from that process provide well‐honed insights into the strengths and weaknesses of the abductive research. The first commentary, by Frank Kardes, offers convincing evidence showing that the techniques of abductive thinking are similar to other explorative techniques currently being successfully used in deductive research. Eileen Fischer sees abductive thinking as integral to inductive and qualitative thinking as it facilitates the generation of new constructs and remaps established ones. Stephen Spiller’s explores the implication of starting from interesting and paradoxical data rather than from established theory. The research challenge then requires a focus on strategic sampling of methods, responses and critical constructs that confirm or limit a provisional theory. Aparna Labroo articulates the benefits of abductive thinking to help resolve complex practical problems, but warns against the proliferation of multiple findings that may be difficult to validate. Finally, Bublitz and Peracchio celebrate the value of abductive research to help resolve social issues and enable the fruitful merger of publishable research with personal social action.
Article
Retailers increasingly adopt temporary loyalty programs (TLPs), in which consumers have limited time, often less than half a year, to save stamps and redeem highly discounted rewards. These programs often run alongside the retailers’ permanent loyalty programs in an attempt to increase customer engagement. Despite the growing popularity of TLPs, the literature on the topic remains limited. We address this gap by looking at the redemption rate, the industry’s primary success indicator, of almost 900 TLPs across a broad set of grocery retailers in 45 countries. We study the effects of four key design characteristics (the duration of the program, the discount offered, the spending requirement before an award can be redeemed, and the reward depth) on the redemption rate, and explore how these effects vary across a broad range of retailer and country characteristics. In doing so, we control for both a retailer’s potential self-selection into running a TLP and the potential endogeneity of the subsequent design choices. We derive a set of actionable results on how to design successful TLPs and show that high redemption rates are not only beneficial for the program operator and reward manufacturer, but also translate into higher sales and profit for the retailer.
Article
Do users value a free technology less than one they pay for? In a two-stage randomized trial of improved grain storage technology in India, we test whether subsequent user willingness-to-pay is affected by free distribution compared to a small positive price. We find paying an initial price of zero has a strong negative effect on users’ long-run willingness-to-pay but is not associated with differences in either reported use or benefits derived from the technology. The lower valuation implies a 20 to 30 percent decrease in long-run adoption, suggesting free distribution can stifle future markets for repeat-purchase goods.
Article
Cost-Benefit Analysis (CBA) is an increasingly important form of environmental impact assessment. CBA has long been used for analysing existing air pollution policy proposals and ensuring that the benefits of proposed policies outweigh the costs. However, with the Clean Air Policy package proposed in 2013, the European Commission reversed the conventional approach. Instead of using CBA to calculate economic welfare of proposed emission levels, they used CBA to calculate a precise economic welfare-maximising solution and used the corresponding calculated emission levels as basis for their proposal. Despite the year 2016 adoption of much of the policy package proposal, air pollution will still be problematic in Europe in year 2030. It is expected that most parts of the European Union will experience air pollution levels above those recommended in the new air quality guideline values recently updated by the World Health Organization (WHO). The European Commission is now revising the air quality targets for the European Union, and it reasonable to assume that CBA will once again be influential. At the same time as the influence of CBA has grown with respect to air pollution policy, the literature criticising standard welfare economics and CBA as a concept has increased, albeit in an unfocused way. Given these two opposing trends, it is timely to compile a variety of perspectives and an in-depth discussion as to whether this current use of CBA to support air pollution policies is scientifically robust. This conceptual paper discusses the implicit methodological choices made when using an economic welfare-maximising CBA as an impact assessment tool to set targets in air quality policy proposals. The discussion applies an air pollution CBA-perspective to the existing critique of CBA and welfare economics and adds seminal papers from a well-established body of criticism of economic analysis. Perspectives from the disciplines of behavioural economics, economic psychology, and complexity economics are included and compared in terms of the way in which standard economics represents economic decision-making. This paper is the first to include perspectives from all these disciplines in a discussion of applied air pollution CBAs. The body of criticism is contrasted with theories from science-technology-society studies and an empirical description of the actual process from the production of an impact assessment to a final policy agreement. Potential pathways are discussed, including a discussion of alternatives to the current approach. On balance, minor adjustments, major adjustments (requiring further research), as well as methodological improvements are needed. Desirable minor adjustments include the need to avoid perfect foresight CBAs. It is important to include a range of potential air policy ambitions that are contingent on economic development, climate policy development, and equity preferences. Furthermore, the CBA should be based on a combination of climate and air pollution control options, and not just air pollution control. Appropriate major adjustments include better representation of technology learning, and potentially positive system feedbacks from, for example, electric vehicles. Another major adjustment is the monetisation and inclusion of all known environmental and human health externalities. A final major adjustment is ensuring that CBAs can accommodate existing environmental policy targets as feasible model solutions. The main and important methodological recommendation is that the fundament of CBA methodology should be left as it is, although policy proposal impact assessments should be expanded with analyses made with other methodologies. Such methodologies may adopt other ethical perspectives, based on, for example, egalitarian and hierarchical rationales, when analysing or proposing the ambition levels of air pollution policies.
Article
Commerce has been moved to online platforms, and purchasing decisions have begun to be made online without face-to-face interaction with digitalization. The digitalization of interaction eliminates the product-specific information asymmetry between sellers and consumers in favor of consumers. On the other hand, the digital footprints left by individuals in digital environments and the internet's ability to offer personalized content independent of time and place have led to the emergence of a new type of information asymmetry. The processing of consumer data has made it possible to develop digital nudge messages and content containing cognitive biases and thus posing the risk of directing consumers to irrational consumption decisions. In this study, first of all, the product pages of e-commerce platforms were examined, and frequently used cognitive biases to direct consumers to irrational consumption were revealed. Subsequently, the frequency of consumers' decision-making under the influence of cognitive biases was determined by experiments with volunteer participants on an e-commerce page developed. In addition, the data of the participants and the rational behavior scores of the participants were obtained by questionnaire study, and the relationships between cognitive biases and personal data such as rationality score, age, gender, shopping frequency, and daily time spent on the internet were analyzed by binary logistic regression. As a result of the study, the factors affecting each cognitive bias were determined, and recommendations were made for further researches.
Chapter
SEE (Social, Emotional and Ethical) attributes are the driving force behind decision-making, which owes its existence to several pioneers, scientists, researchers and educators who have thought creatively and carefully about education as a way to help present and future generations thrive. The SEE Learning framework is the basis for the SEE attributes. The framework is based on the work of the Social and Emotional Learning (SEL) community, which has shown that developing positive emotional regulation, self-compassion and interpersonal skills improves academic growth and individual well-being during key stages of human development. Traditional ways of thinking and acting are based on basic human values that can be seen through common sense, experience and Science. In everything we do, we should truly want the happiness of everyone we can affect and we should work on having an attitude of compassion for everyone. Making decisions is an important part of most people’s daily lives. Every day, everyone has to decide how to handle a situation. People decide what to do based on their SEE traits. In this chapter, we designed a mathematical model-based structure that shows how SEE attributes help us set up our Bioinformatics systems to bring out our hidden forces so we can make the best decision in an environment with multiple options.KeywordsSEE (Social emotionalethical) attributesSelf-compassionTraditional thinkingEthical mindsetDecision-making
Chapter
To monetize digital technologies, many firms use platform-based business models. While such digital platforms can yield tremendous profits, they also pose new challenges, among them privacy, harmful content such as hate speech, cyberbullying, or discrimination, as well as competition and innovation. These challenges have seen an uptick in research interest in the past years yet lack a structured and holistic overview. To resolve, this chapter reports a structured and interdisciplinary literature review. We document open research questions and outline mutual dependencies between the topics under consideration.
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Az ügyfelek viselkedésének vizsgálata a közgazdaságtan egyik fontos feladata általában, ezért a viselkedés-gazdaságtan az egyik legfontosabb része. Számos tényező befolyásolja az emberek vásárlási döntését, de vajon ugyanez a helyzet a turizmusban is, ahol a termék valójában különböző termékek és szolgáltatások komplexuma? Az emberek utazási szokásai változatosak és folyamatosan változnak a különböző tényezők miatt: belső és külső. A turizmus fontos helyet foglal el a világgazdaságban. 2019-ben az egyik vezető pozíciót töltötte be. Egyes országok gazdasága teljes mértékben a turisztikai tevékenységtől függ. Évente több mint egymilliárd ember utazik. Éppen ezért fontos a turizmus egyik legfontosabb elemének – a turistáknak – és viselkedés-gazdaságtanának tanulmányozása.
Article
Do consumers react differently to zero prices? We test the presence of a zero-price effect in child health care and find that a zero price is special as it boosts demand discontinuously. A zero price affects resource allocations by encouraging healthier children to use more services and exacerbates behavioral hazard by increasing inappropriate use of antibiotics. A co-payment, of as small as US$2 per visit, alleviates these problems without substantially increasing financial risk. However, a zero price may be used to boost demand for highly cost-effective treatments. Zero and non-zero prices should be strategically chosen to achieve specific goals. (JEL G22, H75, I11, I13, I18, J13)
Article
Various studies conducted in recent years have found that in many cases, consumer behaviour in the US does not correspond with assumptions associated with rational behaviour. One of the areas examined in this context is the impact of the zero price. This article takes two experiments that examined the zero price effect in the US and repeats them in Israel to check if Israeli consumer behaviour in this field is similar to that of American consumers. The results show that at least in terms of the zero price effect, Israeli consumer behaviour differs from that of American consumers: while American consumers are greatly influenced by the opportunity to receive free products, Israeli consumers are far less influenced by the opportunity to receive free items.
Article
Fourteen experiments ( N = 10,556 adult participants, including more than 20,000 observed choices across 25 issues) documented how people perceive and respond to relative progress out in the world, revealing a robust “negative-lumping” effect. As problematic entities worked to better their ways, participants shifted to dismiss them if they fell short of categorical reform—despite distinctions in improvement. This increased dismissal of relative gains as “all the same” was driven by the belief that falling short signals an eschewal of doing the bare minimum and lacking serious intent to change, making these gains seem less deserving of recognition. Critically, participants then “checked out”: They underrewarded and underinvested in efforts toward “merely” incremental improvement. Finally, in all experiments, participants lumped together absolute failures but not absolute successes, highlighting a unique blindness to gradations of badness. When attempts to eradicate a problem fail, people might dismiss smaller but critical steps that were and can still be made.
Article
This study proposes a novel framework for designing business rule analytics to assist businesses offering digital content in effectively converting free-only users (FOUs) into paying customers. Based on the theory of expected utility, we expand upon traditional frequency-driven rule analytics by integrating three business-relevant factors (target size, conversion profit, and conversion likelihood) into the process of generating recommendations for FOUs in digital content markets. The framework was tested using two different types of empirical analysis. We conducted a field experiment collaborating with a nationwide e-book store to determine how FOUs responded to the recommendations generated under the proposed framework. Furthermore, we analyzed over 5 million transactions collected from the e-book seller and a mobile application provider to examine the impact of customer segmentation on the effectiveness of our approach. Our findings suggest that business analytics derived from the utility-based mechanisms can significantly enhance digital content providers' business performance.
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The study explores how price promotions such as probabilistic and conventional fixed price promotion impact the pain of paying within the individual differences of tightwad consumers, unconflicted consumers and spendthrift consumers. An online experiment was done to see how the pain of paying might impact price promotion by simulating a supermarket shopping environment. We find that probabilistic pricing promotions successfully stimulate demand, as they minimise the pain of paying more effectively, compared with fixed price promotions. For tightwad consumers who are much more susceptible to pain, probabilistic price promotion has demonstrated greater efficacy in reducing the pain of paying compared to fixed price promotion. In the case of unconflicted consumers, the level of pain of paying showed a difference between fixed and probabilistic price promotion, but at a lower rate as compared to tightwad consumers. However, the probabilistic price promotion did not demonstrate any efficacy in reducing the pain of paying among spendthrift consumers, who are less susceptible to the pain of paying, than the fixed price promotion in contrast to tightwad consumers. The results elucidate a reduction in the pain of payment persists to be a path by which price promotions build customer value. Keywords: Fixed price promotion, Probabilistic price promotion, Pain of Paying, Spendthrift consumer, Tightwad consumer, Unconflicted consumer
Book
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En síntesis, la cultura se comparte. Para que un valor, creencia o práctica en particular pueda ser considerado como característica cultural es necesario que lo comparta una porción significativa de la sociedad. Así pues, la cultura es considerada con frecuencia como el conjunto de costumbres de grupo que vinculan entre sí a los miembros de una determinada sociedad. Por supuesto, las lenguas son el componente fundamental de cualquier cultura, vehículo de valores, experiencias y costumbres. Varias instituciones sociales que forman parte de una sociedad transmiten los elementos culturales. Entre esas instituciones ocupa un lugar importante la familia, que es el principal agente de la culturización. Además de la familia, otras tres instituciones han compartido gran parte de la responsabilidad de la transferencia de la cultura: las instituciones educativas, los centros de culto y los medios de comunicación masiva. Este trabajo se centra en las primeras. El objetivo de esta obra es identificar las prácticas de consumo cultural. El trabajo metodológico parte desde la triangulación de métodos y técnicas: observación científica, cuestionarios y grupos focales. A partir de una serie de etapas de trabajo puede apreciarse la regularidad del fenómeno en la práctica cotidiana y luego su comprensión e interpretación. Los resultados develan las preferencias por el consumo de prácticas culturales afines con los gustos y necesidades propios de cada grupo de edad y etapa vital. Se destacan prioridades basadas en ofertas de esparcimiento y diversión, además del significado que adquieren las nuevas tecnologías de la información y las comunicaciones. En esa secuencia de preferencias, se torna preocupante la indiferencia, el desinterés, el descuido o la apatía por otras ofertas respaldadas por los centros culturales, básicamente en lo relativo a programaciones de música y artes escénicas, las muestras de cine independiente, visitas a museos, exposiciones, conferencias y todo tipo de eventos que promueven el culto a la creación artística y a la divulgación científica.
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As customer ratings have become ubiquitous and digital platforms can directly request ratings and tips from customers, understanding how a customer rating influences tipping becomes important. We investigate whether, how, why, and when the order of rating and tipping affects both consumer behaviors in seven studies, including one quasi-field experiment, one archival data analysis, one randomized field experiment, and four randomized lab experiments. We show that asking customers to rate a service professional before tipping negatively impacts the tip amount but that tipping first does not affect subsequent rating scores. We propose that the negative effect of rating on tipping occurs because, when rating a service professional first, customers categorize their feedback as a reward for the service professional, which partially alleviates the felt obligation to tip, resulting in a smaller tip. This negative effect is more evident when customers (1) tip from their own pocket, (2) have higher categorization flexibility, or (3) perceive that the service professional benefits from the rating. Moreover, highlighting the consistency motivation after rating but before tipping can attenuate this effect. These boundary conditions not only support our proposed mechanism and evaluate alternative processes but also have significant practical implications.
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There are many challenges to treating people for a substance use disorder. This study focuses on factors that might predict how long people stay in treatment, and whether it is enough time to complete treatment. Using data from a statewide subsample of the TEDS-D dataset, the results showed that free treatment leads to increased length of stay, while substance use frequency and days waiting to enter treatment have a negative effect on length of stay. Further length of stay predicted treatment completion. We also conducted a post hoc analysis looking at differences between inpatient and outpatient treatment settings. This study offers information that can support efforts to keep clients long enough in treatment to complete it as part of their recovery.
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This study aims to understand the impact of the “Free App of the Day” (FAD) promotion on app sales during the post-promotion period on Amazon Appstore. The FAD promotion spotlights a single paid app by presenting it on the frontpage of Appstore, offers the app free of charge for one day, and broadcasts the promotion through Amazon's social media channels. This digital marketing strategy differs from the commonly adopted digital free sampling and sponsorship practices. In this study, we empirically examine its potential negative effect by analyzing a panel data set of FAD app sales and reviews. We find evidence that, when the app promotion expires, the price rebounding to the pre-promotion level discourages online customers from purchasing the app. We also observe an elevated amount of promotion-induced reviews generated at a high velocity during early days of the post-promotion. We conclude that these promotion-induced reviews are less influential than organic reviews.
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Conducted a field experiment with 3-5 yr old nursery school children to test the "overjustification" hypothesis suggested by self-perception theory (i.e., intrinsic interest in an activity may be decreased by inducing him to engage in that activity as an explicit means to some extrinsic goal). 51 Ss who showed intrinsic interest in a target activity during baseline observations were exposed to 1 of 3 conditions: in the expected-award condition, Ss agreed to engage in the target activity in order to obtain an extrinsic reward; in the unexpected-award condition, Ss had no knowledge of the reward until after they had finished with the activity; and in the no-award condition, Ss neither expected nor received the reward. Results support the prediction that Ss in the expected-award condition would show less subsequent intrinsic interest in the target activity than Ss in the other 2 conditions. (25 ref) (PsycINFO Database Record (c) 2012 APA, all rights reserved)
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A medium-for example, points or money-is a token people receive as the immediate reward of their effort. It has no value in and of itself, but it can be traded for a desired outcome. Experiments demonstrate that, when people are faced with options entailing different outcomes, the presence of a medium can alter what option they choose. This effect occurs because the medium presents an illusion of advantage to an otherwise not so advantageous option, an illusion of certainty to an otherwise uncertain option, or an illusion of linearity to an otherwise concave effort-outcome return relationship. This work has implications for how points influence consumer choice and how money influences human behavior.
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The pricing literature is replete with research focusing on how consumers respond to sales promotions when both the reference level and the change are expressed in dollar terms (i.e., discounts). The "psychophysics of pricing" suggests changes in monetary magnitude are not based on their absolute level, but rather on their deviation from some reference level, or how the change is "framed." Accordingly, a $5 reduction appears more significant on a $15 purchase than a $125 purchase (Tversky and Kahneman 1981). Often times, however, a promotion is presented in non-monetary terms (e.g., a premium). When two resources are delivered simultaneously, but in different currencies (e.g., receive a free razor with the purchase of a can of shaving cream) the marginal value of the non-monetary, incremental benefit may be difficult to evaluate in relation to the focal product or its price. The value of the premium, therefore, may be less likely than a comparable discount to be viewed in a relative sense and suffer from diminishing marginal returns. This research explores how people often fail to exhibit the same diminishing sensitivity to an incremental benefit, or cost, when it is accrued in a currency other than the referent currency. The authors define two different carriers of wealth or welfare (i.e., resources) that are difficult to convert into any meaningful common unit of measurement as "incommensurate." This research introduces a novel mechanism for influencing whether people attend to absolute rather than relative differences, affecting how people value bundled components. This work also offers guidance to managers who might benefit from the strategic use of non-monetary promotions.
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This research examines whether a low-ranking member in a high-status category (e.g., a low-end model of a high-end brand) or a high-ranking member in a low-status category (e.g., a high-end model of a low-end brand) is favored, holding the objective qualities of the items constant. Brand equity research suggests that the quality of a brand is more important than the ranking of a product within a brand. Our research documents a robust —whereby a high-ranking product in a low-status category is favored over a low-ranking product in a high-status category even when information on competing categories is made available. We explain this effect in terms of narrow focusing and evaluability, and we identify boundary conditions of the effect.
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Sales promotions and product enhancements are commonly expected to increase a brand's sales, when they do not negatively impact its utility and cost. That is, the purchase probability of consumers who find the promotion or additional feature attractive will increase, whereas the purchase likelihood of other consumers will not be affected. In contrast, we propose that consumers, who perceive a new feature or promotion as providing little or no value, will be less likely to purchase the enhanced brand even when the added feature clearly does not diminish the value of the brand. Thus, a new product feature or promotion may decrease a brand's overall choice probability when the segment of consumers who perceive it as providing little or no value is large compared to the segment that finds the feature attractive. This prediction was supported in three studies using actual promotions that have been employed in the marketplace (e.g., a Doughboy Collector's Plate that buyers of Pillsbury cake mix had the option to purchase for $6.19). We examined five alternative explanations for this effect. The results suggest that, when consumers are uncertain about the values of products and about their preferences, such features and premiums provide reasons against buying the promoted brands and are seen as susceptible to criticism. We discuss the theoretical and practical implications of the findings for segmentation, product, promotional, and pricing strategies.
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Rotating indifference curves are used to induce an income effect that favors superior brands at the expense of inferior brands in a discrete choice model. When calibrated on scanner panel data, the model yields an objective measure of brand quality which is related to the rate of rotation. The model also leads to asymmetric responses to price promotions where switching up to high quality brands is more likely than switching down. The model is capable of nesting the standard logit model, and is similar to a nested logit model when there exists clusters of brands of like quality. The model is used to explore a product line pricing decision where profits are maximized subject to the constraint that consumer utility is maintained.
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Four experiments test predictions on endowment and mental accounting effects of a theoretical perspective that stresses the symbolic-relational significance for consumer transactions and that posits the placement of qualitative boundaries on fungibility. Although people accepted proposals to buy objects acquired in market-pricing relationships as routine, the same proposals in communal-sharing, authority-ranking, and equality-matching relationships triggered distress and erratically high dollar valuations. Symbolic ownership history also moderated valuations in a purely market setting, and the effects of symbolic-relational source of income extended even to spending decisions. Examination of the model's ordinal predictions revealed stronger effects for equality-matching than for authority-ranking relationships. Copyright 2003 by the University of Chicago.
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The motivation, planning, production, comprehension, coordination, and evaluation of human social life may be based largely on combinations of 4 psychological models. In communal sharing, people treat all members of a category as equivalent. In authority ranking, people attend to their positions in a linear ordering. In equality matching, people keep track of the imbalances among them. In market pricing, people orient to ratio values. Cultures use different rules to implement the 4 models. In addition to an array of inductive evidence from many cultures and approaches, the theory has been supported by ethnographic field work and 19 experimental studies using 7 different methods testing 6 different cognitive predictions on a wide range of subjects from 5 cultures.
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Current psychological theory and research affirm the positive affective and motivational consequences of having personal choice. These findings have led to the popular notion that the more choice, the better-that the human ability to manage, and the human desire for, choice is unlimited. Findings from 3 experimental studies starkly challenge this implicit assumption that having more choices is necessarily more intrinsically motivating than having fewer. These experiments, which were conducted in both field and laboratory settings, show that people are more likely to purchase gourmet jams or chocolates or to undertake optional class essay assignments when offered a limited array of 6 choices rather than a more extensive array of 24 or 30 choices. Moreover, participants actually reported greater subsequent satisfaction with their selections and wrote better essays when their original set of options had been limited. Implications for future research are discussed.
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Conflict and choice are closely related in that choice produces conflict and conflict is resolved by making a choice. Although conflict was invoked in psychological approaches to decision making early on (Lewin, 1931/1964), no generally accepted measure of conflict strength has been established (Tversky & Shafir, 1992). The present study introduces a model (multiattribute decision field theory) that predicts a decision time pattern depending on the conflict situation. In a risky decision-making experiment with multiattribute choice alternatives, decision time is investigated as a possible measure of conflict strength. It is shown that the model can be fitted to a complex choice pattern.
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The standard model of labor is one in which individuals trade their time and energy in return for monetary rewards. Building on Fiske's relational theory (1992), we propose that there are two types of markets that determine relationships between effort and payment: monetary and social. We hypothesize that monetary markets are highly sensitive to the magnitude of compensation, whereas social markets are not. This perspective can shed light on the well-established observation that people sometimes expend more effort in exchange for no payment (a social market) than they expend when they receive low payment (a monetary market). Three experiments support these ideas. The experimental evidence also demonstrates that mixed markets (markets that include aspects of both social and monetary markets) more closely resemble monetary than social markets.
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Economists usually assume that monetary incentives improve performance, and psychologists claim that the opposite may happen. We present and discuss a set of experiments designed to test these contrasting claims. We found that the effect of monetary compensation on performance was not monotonic. In the treatments in which money was offered, a larger amount yielded a higher performance. However, offering money did not always produce an improvement: subjects who were offered monetary incentives performed more poorly than those who were offered no compensation. Several possible interpretations of the results are discussed.
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The deterrence hypothesis predicts that the introduction of a penalty for a specific behavior, which leaves everything else unchanged, will reduce the occurrence of that behavior. We present here the result of a field study of this hypothesis, conducted in a group of day-care centers in Israel. In these day-care centers, parents sometimes arrive late to collect their children, forcing a teacher to stay after the official closing time. We study the behavior of the parents over three periods. In the first four weeks period we simply record the number of late-coming parents. In the second period, twelve weeks long, we introduce a monetary fine for late-coming parents. As a result the number of late-coming parents increased significantly. In the last period of four weeks we observed the effect of cancellation of the fine. Here the result was that the number of late-coming parents remained stable at the level prevailing in the second period, hence higher than it was in the first period, be...
Chapter
One of the main themes that has emerged from behavioral decision research during the past three decades is the view that people's preferences are often constructed in the process of elicitation. This idea is derived from studies demonstrating that normatively equivalent methods of elicitation (e.g., choice and pricing) give rise to systematically different responses. These preference reversals violate the principle of procedure invariance that is fundamental to all theories of rational choice. If different elicitation procedures produce different orderings of options, how can preferences be defined and in what sense do they exist? This book shows not only the historical roots of preference construction but also the blossoming of the concept within psychology, law, marketing, philosophy, environmental policy, and economics. Decision making is now understood to be a highly contingent form of information processing, sensitive to task complexity, time pressure, response mode, framing, reference points, and other contextual factors.
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This paper re‐examines the commonly observed inverse relationship between perceived risk and perceived benefit. We propose that this relationship occurs because people rely on affect when judging the risk and benefit of specific hazards. Evidence supporting this proposal is obtained in two experimental studies. Study 1 investigated the inverse relationship between risk and benefit judgments under a time‐pressure condition designed to limit the use of analytic thought and enhance the reliance on affect. As expected, the inverse relationship was strengthened when time pressure was introduced. Study 2 tested and confirmed the hypothesis that providing information designed to alter the favorability of one's overall affective evaluation of an item (say nuclear power) would systematically change the risk and benefit judgments for that item. Both studies suggest that people seem prone to using an ‘affect heuristic’ which improves judgmental efficiency by deriving both risk and benefit evaluations from a common source—affective reactions to the stimulus item. Copyright © 2000 John Wiley & Sons, Ltd.
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Many decisions are based on beliefs concerning the likelihood of uncertain events such as the outcome of an election, the guilt of a defendant, or the future value of the dollar. Occasionally, beliefs concerning uncertain events are expressed in numerical form as odds or subjective probabilities. In general, the heuristics are quite useful, but sometimes they lead to severe and systematic errors. The subjective assessment of probability resembles the subjective assessment of physical quantities such as distance or size. These judgments are all based on data of limited validity, which are processed according to heuristic rules. However, the reliance on this rule leads to systematic errors in the estimation of distance. This chapter describes three heuristics that are employed in making judgments under uncertainty. The first is representativeness, which is usually employed when people are asked to judge the probability that an object or event belongs to a class or event. The second is the availability of instances or scenarios, which is often employed when people are asked to assess the frequency of a class or the plausibility of a particular development, and the third is adjustment from an anchor, which is usually employed in numerical prediction when a relevant value is available.
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This paper re-examines the commonly observed inverse relationship between per- ceived risk and perceived benefit. We propose that this relationship occurs because people rely on aÄect when judging the risk and benefit of specific hazards. Evidence supporting this proposal is obtained in two experimental studies. Study 1 investigated the inverse relationship between risk and benefit judgments under a time-pressure condition designed to limit the use of analytic thought and enhance the reliance on aÄect. As expected, the inverse relationship was strengthened when time pressure was introduced. Study 2 tested and confirmed the hypothesis that providing information designed to alter the favorability of one's overall aÄective evaluation of an item (say nuclear power) would systematically change the risk and benefit judgments for that item. Both studies suggest that people seem prone to using an 'aÄect heuristic' which improves judgmental eÅciency by deriving both risk and benefit evaluations from a common source — aÄective reactions to the stimulus item. Copyright # 2000 John Wiley & Sons, Ltd.
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Choice often produces conflict. This notion, however, plays no role in classical decision theory, in which each alternative is assigned a value, and the decision maker selects from every choice set the option with the highest value. We contrast this principle of value maximization with the hypothesis that the option to delay choice or seek new alternatives is more likely to be selected when conflict is high than when it is low. This hypothesis is supported by several studies showing that the tendency to defer decision, search for new alternatives, or choose the default option can be increased when the offered set is enlarged or improved, contrary to the principle of value maximization.
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Based on contrast effects studies from psychology, we predicted that movers arriving from more expensive cities would rent pricier apartments than those arriving from cheaper cities. We also predicted that as people stayed in their new city they would get used to the new prices and would readjust their housing expenditures countering the initial impact of previous prices. We found support for both predictions in a sample of 928 movers from the PSID. Alternative explanations based on unobserved wealth and taste, and on imperfect information are ruled out.
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Self-descriptive statements known as beliefs and attitudes are often under the partial control of the individual's overt behavior and its apparent controlling variables. Since these public stimuli and responses are those which the socializing community itself must use initially in training the individual to "know himself," the individual's belief and attitude statements are functionally equivalent to those that an outside O would attribute to him. Direct control over an individual's attitude statements is exerted by his own overt behavior and the stimulus conditions in which it occurs. (PsycINFO Database Record (c) 2012 APA, all rights reserved)
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This article reports 4 experiments demonstrating the power of social-relational framing to complicate superficially straightforward economic exchanges of goods and services. Drawing from Alan Fiske’s theoretical framework as well as Tetlock’s sacred value protection model, the experiments demonstrate (a) pricing distortions and refusals to answer certain questions when people contemplate buying or selling objects endowed with special relational significance; (b) moral outrage and cognitive confusion when people are asked whether they would allow market-pricing norms to influence decisions that fall under the normative purview of communal-sharing, authority-ranking, and equality-matching relationships; and (c) elements of tactical flexibility in how people respond to breaches of relational boundaries (a willingness to turn a blind eye to taboo trade-offs when it is in their interest to do so). An agenda for future work is offered that explores how pragmatic, economic interests are balanced against the desire to be (or appear to be) the type of person who honors social-relational constraints on what should be considered fungible.
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Almost universally, research and practice suggest that a brand that increases its product assortment, or variety, should benefit through increased market share. In this paper, we show this is not always the case. We introduce the construct “assortment type” and demonstrate that the effect of assortment size on brand share is systematically moderated by assortment type. We define an “alignable” assortment as a set of brand variants that differ along a single, compensatory dimension such that choosing from that assortment only requires within-attribute trade-offs. In contrast, we define a “nonalignable” assortment as a set of brand variants that simultaneously vary along multiple, noncompensatory dimensions, demanding between-attribute trade-offs. In turn, we argue that an alignable assortment can efficiently meet the diverse tastes of consumers, thereby increasing brand share, but that a nonalignable assortment increases both the cognitive effort and the potential for regret faced by a consumer, thereby decreasing brand share. We term this effect “overchoice.” Across three studies, we provide evidence of overchoice and tie the effect to the effort and regret brought about by nonalignability. In the process, we demonstrate that simplification of information presentation, reversibility of choice, and a reduction in underlying nonalignability serve to reduce or eliminate this effect.
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Sellers often explicitly suggest to buyers that they compare one option to other (reference) options. Building on the notion that loss aversion is more pronounced when comparisons are explicit rather than implicit, we propose that the mere fact that consumers are explicitly told to make particular comparisons induces more risk-averse, cautious choice and bidding behavior. This proposition was supported in a field experiment involving real online auctions, in which comparisons among listings either were done spontaneously by bidders or were encouraged using an explicit instruction to compare the focal auction with adjacent listings. Results showed that explicit reference points (1) diminished the influence of adjacent auction prices on the focal auction’s price; (2) led participants to submit fewer, lower, and later bids; (3) increased the incidence of sniping; (4) decreased bidding frenzy; and (5) decreased the tendency to bid on multiple items simultaneously. The impact of explicit comparisons on risk-averse behavior was further tested in a very different context using a laboratory choice experiment. In that study, explicit instructions to compare option sets increased the tendency to choose the compromise, low-risk, and all-average alternatives. We discuss the theoretical and practical implications of this research.
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This paper challenges the common assumption that economic agents know their tastes. After reviewing previous research showing that valuation of ordinary products and experiences can be manipulated by non-normative cues, we present three studies showing that in some cases people do not have a pre-existing sense of whether an experience is good or bad—even when they have experienced a sample of it.
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This paper describes the development and validation of a general causality orientations scale. Causality orientations are conceptualized as relatively enduring aspects of people that characterize the source of initiation and regulation, and thus the degree of self-determination, of their behavior. Three orientations—autonomy, control, and impersonal—are measured by the three subscales of the instrument. Individuals are given a score on each orientation, thus allowing the use of the theoretically appropriate subscale (or, in some cases, a combination of subscales) to predict affects, cognitions, and behaviors. The scale was shown to have internal consistency and temporal stability. The orientations were shown to fit appropriately into a nomological network of constructs and to relate to various behaviors that were hypothesized to be theoretically relevant.
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This article described three heuristics that are employed in making judgements under uncertainty: (i) representativeness, which is usually employed when people are asked to judge the probability that an object or event A belongs to class or process B; (ii) availability of instances or scenarios, which is often employed when people are asked to assess the frequency of a class or the plausibility of a particular development; and (iii) adjustment from an anchor, which is usually employed in numerical prediction when a relevant value is available. These heuristics are highly economical and usually effective, but they lead to systematic and predictable errors. A better understanding of these heuristics and of the biases to which they lead could improve judgements and decisions in situations of uncertainty.