Loss Aversion and Reference-Dependent Preferences in Multi-Attribute Negotiations

Negotiation analysis and game theoretic bargaining models usually assume parties to have exogenous preferences from the beginning of a negotiation on and independent of the history of offers made. On the contrary, this paper argues that preferences might be based on attribute-wise reference points changing during the negotiation process. Aversion against losses relative to the reference point determines negotiators’ decisions in the negotiation and after its termination. The emergence and implications of reference points in a negotiation context are motivated, exemplified, and modeled formally. Furthermore, data from an internet experiment on endogenous preferences in bilateral multi-attribute negotiations is presented. The data supports the behavioral model.     

Theory-Driven Choice Models

We explore issues in theory-driven choice modeling by focusing on partial-equilibrium models of dynamic structural demand with forward-looking decision-makers, full equilibrium models that integrate the supply side, integration of bounded rationality in dynamic structural models of choice and public policy implications of these models.     

Product Quality,Cost Asymmetry and the Welfare Loss of Oligopoly

When competition is tough, firms which do not implement the least expensive technology are forced to exit, or the low cost firms are able to increase their market share. Persistent cost or profit differences require some form of restricted entry, specific intangible assets or oligopolistic co-ordination. If technology or skills is easy to transfer but it is not transferred because of collusion, we have to add a cost side effect ('the staircase')stemming from the non-proliferation of the best technology- to the well-known demand side loss ('the triangle'). This paper presents a model with vertical product differentiation and develops a method which disentangles cost differences coming from vertical product differences and those coming from other sources. Data for the paper industry in the EU, in the US and in Japan indicate that cost differences are large. If at least some part of them comes from oligopolistic co-ordination, then the welfare loss of oligopoly is much larger than the usually measured demand side welfare loss.     

Role of Forgetting in Memory-Based Choice Decisions: A Structural Model

We propose a structural model to investigate the impact of forgetting on consumers' brand choice decisions in frequently purchased products. Forgetting results in consumers imperfectly recalling their prior brand evaluations when making a purchase decision in the category. We conceptualize the imperfect recall by positing that consumers recall their prior evaluations with noise. Based on prior research in the behavioral area, we characterize the extent of forgetting as an increasing and concave function of time. Our framework generates analytical results on the impact of forgetting on consumers' brand evaluations and their consequent purchase behavior. We calibrate our model using scanner panel data for liquid detergents. Furthermore, we obtain insights into the consumers' extent of forgetting in the category, extent of learning, predicted price elasticities and implications on state dependence and habit persistence. Our results underscore the importance of modeling consumers' ability to recall only imperfectly.     

选择与选择成本——品牌降低选择成本的机制分析

本文通过对选择爆炸式增长的描述,抽象出一般选择过程模型,并深入分析这一过程中所发生的成本及构成,证明品牌正是通过降低消费者的选择成本提高了选择效率,而企业外部顾客的选择效率决定了处于过剩阶段企业的内部价值的实现和内部效率的高低。本文区分了交易费用与选择成本的差别,进一步深化了对"品牌经济学"分析范式的核心范畴——选择成本的认识。     

A Tale of Two Pizzas: Building Up from a Basic Product Versus Scaling Down from a Fully-Loaded Product

Consumers in the U.S. and Italy were asked to either build up from a consumable base product (pizza) by adding components or scale down from a fully-loaded product by subtracting components. In each country consumers ended up with significantly more ingredients, and a pizza for a higher cost, in the Scale Down Condition than in the Build Up Condition. Results are discussed in terms of the principle of loss aversion underlying phenomena such as the endowment effect, marketing implications of this effect, and future research needs.     

饭店并购的财务问题及风险规避

并购是现代饭店常见的一种资本运作,能有效地实现饭店的快速扩张。并购能够提高饭店的规模经济效率,降低交易费用,使饭店多元化发展。但饭店在并购中会出现并购目标饭店价值评估、并购饭店的支付方式、并购饭店的融资等一系列的财务问题。正确认识饭店并购的价值评估风险、流动性风险、融资风险和汇率风险等财务风险并进行合理规避十分重要。     

Extended Framework for Modeling Choice Behavior

We review the case against the standard model of rational behavior and discuss the consequences of various anomalies of preference elicitation. A general theoretical framework that attempts to disentangle the various psychological elements in the decision-making process is presented. We then present a rigorous and general methodology to model the theoretical framework, explicitly incorporating psychological factors and their influences on choices. This theme has long been deemed necessary by behavioral researchers, but is often ignored in demand models. The methodology requires the estimation of an integrated multi-equation model consisting of a discrete choice model and the latent variable model system. We conclude with a research agenda to bring the theoretical framework into fruition.     

Recent Progress on Endogeneity in Choice Modeling

We describe recent progress in several areas related to endogeneity, including: choice set formation and attention to attributes; interactions among decision-makers; respondents' strategic behavior in answering stated preference choices; models of multiple discrete/continuous choice; distributions of willingness-to-pay; and methods for handling traditionally endogenous explanatory variables.     

Choice in Computer-Mediated Environments

In the last several years, the increased diffusion of computer andtelecommunications technologies in businesses and homes has produced newways for organizations to connect with their customers. These computermediated environments (CMEs) such as the World Wide Web raise new researchquestions. In this paper, we examine the potential research issuesassociated with CMEs in five areas: (1) decision processes, (2) advertisingand communications, (3) brand choice, (4) brand communities, and (5)pricing.     

Meta-analysis selection bias in marketing research

The tendency of meta-analytic authors to select particular studies is called selection bias. Selection bias can affect the strength of the meta-analytic estimate and the attention that scholars devote to the results. This research is, in effect, a meta-analysis of the effect sizes reported or calculated from 94 meta-analysis studies of various topics in marketing research. The analysis reveals that estimates depend on the publication status of the included studies. The greater the percentage of studies that were published in academic journals vs. non-published studies, the greater is the size of the meta-effects, and the more published studies from leading journals the meta-analysis includes, the stronger the effect size. The meta-analytic effect size is a mediator for the influence of both the ratio of unpublished studies and the ratio of studies from leading journals on the probability of a meta-analysis to be published in a leading journal, which increases the number of citations to a meta-analysis. The findings of this study have several implications for meta-analysts, editors, reviewers and the marketing community on how to conduct and read current and future meta-analysis in marketing research.     

Hybrid Choice Models: Progress and Challenges

We discuss the development of predictive choice models that go beyond the random utility model in its narrowest formulation. Such approaches incorporate several elements of cognitive process that have been identified as important to the choice process, including strong dependence on history and context, perception formation, and latent constraints. A flexible and practical hybrid choice model is presented that integrates many types of discrete choice modeling methods, draws on different types of data, and allows for flexible disturbances and explicit modeling of latent psychological explanatory variables, heterogeneity, and latent segmentation. Both progress and challenges related to the development of the hybrid choice model are presented.     

What Will Consumers Pay for Social Product Features?

The importance of ethical consumerism to many companies worldwide has increased dramatically in recent years. Ethical consumerism encompasses the importance of non-traditional and social components of a company's products and business process to strategic success – such as environmental protectionism, child labor practices and so on. The present paper utilizes a random utility theoretic experimental design to provide estimates of the relative value selected consumers place on the social features of products.     

Current Issues in Discrete Choice Modeling

Until recently, computational constraints forced researchers in thediscrete choice area to limit themselves to very simple statistical models,such as the multinomial logit (MNL), in which choice probabilities could beevaluated quickly on a computer. But the MNL only makes sense as abehavioral model under very special circumstances. Recent advances incomputation make it possible to estimate richer behavioral models thatgenerate very complex choice probability expressions. This paper discusses anumber of possible avenues for future research in the discrete choice areain light of these developments.     

Competing Online: Studying Consumer Choice Drivers for Online Financial Services

ABSTRACT

Given the rapid increase in the consumer use of online services and the increase in competition between firms that compete online, firms are faced with a crucial challenge. Having invested significant resources in transitioning consumers from using offline services to using online services, they now need to understand what drives consumers to choose between competing online services. Our study seeks an exploratory answer to the above challenge. Specifically, we consider, “what role do factors that drive consumers into using online services play in assisting firms better compete in the online space?” This paper explores the above question by quantifying the value that consumers of an online financial service place on having access to in-depth product information, an affordable online service, an easy to use online service, access to offline capabilities, and available marketing promotions. The results reported in this paper are based on a web-based discrete choice experiment in which 2,209 consumers were asked to compare various online financial service offerings, differing from each other in terms of the relative availability of our critical factors. The results demonstrate that consumer preferences (relative utilities) for various factors of an online financial service are different. Our results enable practicing managers to understand the factors that drive consumer choice when faced with competing online services. We believe that these results have both managerial and research implications for design, management and operations strategy formulation for online services.     

Trip chaining behavior in multi-destination shopping trips: A field experiment and laboratory replication

Models of consumer store patronage generally employ the economic theory-based assumption that, all else being equal, consumers seek to minimize travel distance. Moreover, consistent with reference-dependent theory, findings from recent experimental research conducted in a controlled lab setting suggest that holding travel distance constant, the configuration of stops along multi-stop routes may also impact store-patronage decisions. However, given the use of simplified map configurations of multi-stop routes, along with the stimulus-based nature of the laboratory exercise, the external validity of these findings are open to question. Thus, the purpose of the three experiments in the present paper is to replicate and test the external validity of the reference-dependent predictions supported in previous research. In experiment one, consumer travel preferences are examined in a memory-based field experiment with results replicating those of earlier research. In experiment two, results are again replicated, but this time in a lab setting using realistic maps. Finally, experiment three provides a test of boundary conditions for the theory-consistent results of experiments one and two.     

How Online Product Reviews Affect Retail Sales: A Meta-analysis

A growing body of research has emerged on online product reviews and their ability to elicit performance outcomes desired by retailers; yet, a common understanding of the performance implications of online product reviews has eluded us. Scholars continue to navigate an array of studies assessing different design elements of online product reviews, and various research settings and data sources. We undertake a meta-analysis of 26 empirical studies yielding 443 sales elasticities to examine how these variables relate to retail sales. Building on well-established meta-analytical methods, we address the following questions: How does review valence influence the elasticity of retailer sales? What about review volume? For which product types and usage situations do online product reviews have a greater impact on retailer sales elasticity? Which types of online reviewers and websites exert the greatest influence on retailer sales elasticity? Our study answers these important questions and provides a much needed quantitative synthesis of this burgeoning stream of research.     

A New Look at Constructed Choice Processes

Normative models of choice assert axiomatically that preferences are consistent, coherent, and determined only by relevant alternatives. In contrast to this classical economic perspective, behavioral models derived from research in psychology and consumer behavior assert that preferences are not guided by an internal, stable utility function but are constructed during the choice process. The current paper is based on a session on constructed choice processes (CCP) at the 2004 Choice Symposium that focused on how the standard CCP model can be enriched by bringing theories and tools from modern research in social cognition to bear on choice phenomenon. The richer conceptual framework presented by new, currently unpublished empirical work provides a novel perspective on choice construction by integrating the roles of subjective construal, experiential information, attribution, goals, and satisfaction in understanding preference construction processes in choice.     

A Cross-Validity Comparison of Conjoint Analysis and Choice Models at Different Levels of Aggregation

Several (ratings-based) conjoint analysis and experimental choice (choice-based conjoint) models are compared on their ability to predict both aggregate choice shares among the sample and individual choices in an availability validation task. While there was a weak relationship between validations at the individual and aggregate levels, several models stand out. In general, models capturing individual differences validated well at both the individual and aggregate level. The hierarchical Bayes choice and conjoint models validated particularly well.Among choice models, the hierarchical Bayes choice model had the highest aggregate and individual level-validations. It was followed by the hybrid and seven segment latent segment choice models. Overall, the highest validating ratings-based conjoint model was the hierarchical Bayes model. However, the seven segment latent segment conjoint model produced better aggregate choice share validations than any other conjoint model. These results indicate that validations can be improved either by using benefit segment models and/or merging different types of data to estimate more individualized models.In most cases, rescaling improved the ratings-based, but not the choice-based choice share validations. This suggests that one might adjust for differences between ratings and choice tasks before making choice share predictions.     

Buying Norwegian Salmon: A Cross-Cultural Study of Store Choice Behavior

This article examines antecedents of store choice behavior in a cross-cultural context (i.e., 1.296 consumers in Sweden, Italy, and China). Chinese culture has a significant downward impact on choosing super-/hypermarkets and an upward impact on choosing fish shops when buying salmon. Italian consumers have a positive impact on the fish shop option, but a negative impact on the street market option. If consumers prefer salmon and think it is luxurious and sophisticated and not a “value for money”-item, the probability of choosing super-/hypermarkets increase. Opposite scores, increase the probability of choosing fish shops. Research and managerial implications are drawn.