Consumer substitution decisions: an integrative framework

Substitution decisions have been examined from a variety of perspectives. The economics literature measures cross-price elasticity, operations research models optimal assortments, the psychology literature studies goals in conflict, and marketing research has examined substitution-in-use, brand switching, stockouts, and self-control. We integrate these perspectives into a common framework for understanding consumer substitution decisions; their specific drivers (availability of new alternatives, internal vs. external restrictions on choice); the moderating role of a consumer’s commitment to an initially desired alternative; and the affective, motivational, cognitive, and behavioral outcomes of substitution. We use this framework to recommend new avenues for research.     

MULTIFRACTIONAL STOCHASTIC VOLATILITY MODELS

The aim of this work is to advocate the use of multifractional Brownian motion (mBm) as a relevant model in financial mathematics. mBm is an extension of fractional Brownian motion where the Hurst parameter is allowed to vary in time. This enables the possibility to accommodate for varying local regularity, and to decouple it from long‐range dependence properties. While we believe that mBm is potentially useful in a variety of applications in finance, we focus here on a multifractional stochastic volatility Hull & White model that is an extension of the model studied in Comte and Renault. Using the stochastic calculus with respect to mBm developed in Lebovits and Lévy Véhel, we solve the corresponding stochastic differential equations. Since the solutions are of course not explicit, we take advantage of recently developed numerical techniques, namely functional quantization‐based cubature methods, to get accurate approximations. This allows us to test the behavior of our model (as well as the one in Comte and Renault) with respect to its parameters, and in particular its ability to explain some features of the implied volatility surface. An advantage of our model is that it is able both to fit smiles at different maturities, and to take volatility persistence into account in a more precise way than Comte and Renault.     

Child labor and schooling responses to anticipated income in South Africa

Forward looking, unconstrained households make child labor and schooling decisions considering their permanent income and weighing the relative returns to child time in various potential activities. The timing of anticipated changes in income should have no effect on child labor and schooling in a setting where households can borrow against permanent income. However, this study documents large increases in schooling attendance and declines in total hours worked when black South African families become eligible for fully anticipatable social pension income. As an explanation, the data are most consistent with liquidity constraints for black elder males forcing rural families into less schooling for boys than they would choose absent the constraint, perhaps because of schooling costs.     

To divide or not to divide? The impact of partitioned pricing on the informational and sacrifice effects of price

Firms often partition a product??s price into two mandatory parts (e.g., the base price of a mail-order DVD and the surcharge for shipping and handling) instead of charging one all-inclusive price. This study examines whether and to what extent partitioned pricing (compared to one all-inclusive price) influences the informational and sacrifice effects of price. We empirically show that partitioned pricing oppositely affects these two distinct roles of price: the informational effect of price (i.e., price as an indicator of quality) increases, while the sacrifice effect (i.e., price as a measure of sacrifice) becomes more negative. In product categories with substantial price?Cquality inferences, the positive impact of partitioned pricing on the informational effect can overcompensate for its negative impact on the sacrifice effect, making partitioned prices the preferable strategy.     

LINKING CHANGES IN REVEALED CAUSAL MAPS AND ENVIRONMENTAL CHANGE: AN EMPIRICAL STUDY

This article explores the cognitive maps of the dominant coalition of one firm over time. It begins with an overview of the cognitive mapping literature and discusses ‘revealed cognitive maps’ as one strategy for measuring managerial cognitive structures. Next, the revealed cognitive maps from one company over a 20-year period are analysed for their fit with the company's environmental context. The data suggest that the fit between cognitive structures and the environment was less than perfect, and that decision-makers both under-identified and over-identified certain environmental factors. These and other data are discussed within the context of a cognitive approach to managerial thinking.     

A quantitative model for the evaluation of technological alternatives

This paper presents a quantitative model that may be of use to the national development planners, investment funding authorities, and entrepreneurs, who are confronted with the problems of choosing the appropriate technology among many available alternatives. The model provides a systematic and analyst-independent methodology for the multicriterion technology selection process, which requires consideration of socioeconomic as well as technological factors. The procedure is mathematically straightforward and has the capability of integrating both objective and subjective aspects of the evaluation process, resulting in a unified technology measure as a guide for decision making. A case study is presented to illustrate the applicability and workability of the development model.     

Branding with the in–out effect: The impact of consonantal articulation on brand evaluation

Recent research has shown that mouth movements, produced even during silent reading, can affect stimulus evaluation. Words featuring systematic wanderings of consonantal stricture spots ranging from the front to the rear of the mouth (inward) are preferred to words with wanderings in the opposite direction (outward). In four experiments, the authors extended this in–out effect from a basic laboratory setting to a more ecologically relevant domain and examined the boundary conditions of possible applications to marketing. In this research, the inward/outward words presented were embedded in common brand imagery such as labels, logos, and product packages. Either with plain graphic information or with more visually informative packaging, inward names were always preferred (all p‐values < 0.001). These results indicate that concurrent information that competitively feeds into the preference judgment did not have diagnostic value when compared to the articulation direction. Such prevalence of the effect even when embedded in more complex stimulus emphasizes the relevance of investigating oral kinematics effects and the need to further research other sensorimotor phenomena in consumer behavior.     

The impact of ADR activity on stock market liquidity: Evidence from Latin America

This paper examines the impact of ADR activity on liquidity of four major Latin American stock markets. We construct a measure of ADR activity in U.S. markets for a sample of ADRs trading during January 2003–December 2010, which is subsequent to the financial liberalization episodes and currency crises that shocked emerging markets in the 1990s. The sample lists 164 depositary receipt programs (Levels I, II, and III): 16 from Argentina, 81 from Brazil, 19 from Chile, and 48 from Mexico. Using System GMM methods to handle the potential effects from stock market development on economic growth and ADR issuance, we find that higher ADR turnover in U.S. markets has positive effects on domestic market turnover, particularly for issuance of exchange-listed (Levels II and III) ADRs. This positive relationship is not a statistical artifact created by the global financial crisis of 2008.     

Saturdays of leisure and memories … : The Mexican market ‘La Pulga’ in the San Joaquin Valley (California)

This research note aims to explore the links between food, memory, nostalgia and leisure through a series of weekly visits to an itinerant Mexican market in the United States. Taking an ethnographic approach to the market of La Pulga held in the city of Merced in California’s San Joaquin Valley, we consider how, in the Mexican–American transnational context, this market provides an opportunity for Mexican migrants to interact with other Mexican people, recreating similar social dynamics displayed in traditional food markets in Mexico. We argue that as well as being a food supply centre, this market may be viewed as a space in which Mexican migrants seek to recreate their homeland and to enjoy an alternative leisure experience. Thus, the visit to the market may be observed as a complex activity in which the senses, the social interactions between Mexican migrants and the consumption of food in a festive setting play a central role in enabling these migrants to break with their everyday lives. Likewise, we suggest that the visit to the market every Saturday not only constitutes a leisure activity, but also serves to construct the ethnic and collective migratory identity that links Mexican migrants with their homeland.     

The Role of Anticipated Emotions in Purchase Intentions

Key personal inputs to decision making reside in expectations about whether a purchase or nonpurchase will make one feel better. Integrating several theoretical approaches, this research proposes a holistic framework formed by four kinds of anticipated emotions (AEs) resulting from the crossing of positive‐ or negative‐valenced emotions with action or inaction. Specifically, this research proposes that consumers under a purchase scenario tend to consider positive and negative AEs of both purchase and nonpurchase in their decisions. Research in this area to date has been sparse and focused mostly on AEs with regard to purchase, but not nonpurchase. The results of four studies confirm that AEs influence purchase decisions in a coordinated way depending on their instrumentality, motivating purchase or nonpurchase. AEs also partially mediate the effect of outcome valence on purchase decisions. Taking the status quo bias as a theoretical basis, this work proposes that the amount of information of favorable and unfavorable outcome messages has a greater influence on AEs motivating purchase than AEs motivating nonpurchase. Finally, future research lines are proposed to expand the use of this fourfold framework and more generally to understand the role of forward‐looking emotions in decision processes.