Working papers

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Departments: Marketing, GREGHEC (CNRS)

This paper studies the impact of consumer resistance, which is triggered by deviations from a psychological reference point, on optimal pricing and cost communication. Assuming that consumers evaluate purchases not only in the material domain, we show that consumer resistance reduces the pricing power and profit. We also show that consumer resistance provides an incentive to engage in cost communication when consumers underestimate cost. While cheap communication does not affect behavior, persuasive communication may increase sales and profit. Finally, we show that a firm can benefit from engaging in operational transparency by revealing information about features of the production process.

Keywords: Price Fairness, Cost Communication, Operational Transparency


Departments: Marketing, GREGHEC (CNRS)

While single-brand reward programs encourage customers to remain loyal to that one brand, coalition programs encourage customers to be “promiscuous” by offering points redeemable across partner stores. Despite the benefits of this “open relationship” with customers, store managers face uncertainty as to how rewards offered by partners influence transactions at their own stores. We use a model of multi-store purchase incidence to show how the value of points shared among partner stores can explain patterns in customer-level purchases across them. The model is used to empirically test hypotheses on how reward spillovers among partners are driven by: (1) differences in policies on reward redemption, (2) the overlap in product categories between stores, and (3) geographic distance between stores within a city. In addition, we leverage variation generated by a natural experiment, i.e., a devaluation of the program's points, to demonstrate how the value of points influences the positioning of partner stores within the coalition and the purchasing patterns across them. We conclude by delineating some managerial implications for the design of a coalition's reward policies, including a simulation showing that customer-centric targeted rewards can be an effective strategy to compensate for the devaluation.

Keywords: loyalty programs, rewards, retailing, Bayesian estimation


Departments: Marketing

We utilize household production theory to address the problem of micro-level demand estimation across complementary goods. According to this theory, consumers buy inputs and combine them to produce final goods from which they derive utility. We use this idea to build a structural model of demand for complements that can be estimated on purchase data in the presence of corner solutions and indivisible packages. We find that, even when reusing the same functional form as some previous models of demand for substitutes, the model can accommodate very different patterns of consumer preferences over complements and lead to a flexible demand system from perfect complementarity to no complementarity. We estimate the model on purchase data from a panel of consumers and show how it can be used to increase the profitability of couponing strategies by taking into account the spillover effect of coupons on demand for complementary categories.

Keywords: Utility Theory, Multicategory Demand Models, Bayesian Estimation


Departments: Marketing, GREGHEC (CNRS)

Empirical demand functions (based on experimental studies, such as Choice Based Conjoint) are critical to many aspects of marketing, such as targeting and segmentation, setting prices and evaluating the potential of new products. While considerable work has been done on developing approaches for ensuring that research subjects are both honest and engaged, the reduced cost associated with collecting data in an online setting has driven many studies to be collected under conditions which leave researchers unsure of the value of the information content provided by each subject. Objective measures related to how the subject completes the study, such as latency (how quickly answers are given), can only be tied to other objective measures (such as the fit of the model or consistency of the answer) and ultimately have questionable relationship to the subject's utility function.In response to this problem, we introduce a mixture modeling framework which clusters subjects based on variances in a choice based setting (multinomial logit models). This model naturally groups subjects based on the internal consistency of their answers, where we argue that a higher level of internal consistence (hence lower variance) reflects more engaged consumers who have sufficient experience with the product category and choice task, to have well-formed utilities. This approach provides an automated way of determining which consumers are relevant. We discuss both the modeling framework and illustrate the methods using data from several commercial conjoint studies.

Keywords: Multinomial Logit, Conjoint Analysis, Data Quality, Finite Mixture Models


Departments: Finance, Marketing

Online crowdfunding is a popular new tool for raising capital to commercialize product innovation. Product innovation must be both novel and useful (1-4). Therefore, we study the role of novelty and usefulness claims on Kickstarter. Startlingly, we find that a single claim of novelty increases project funding by about 200%, a single claim of usefulness increases project funding by about 1200%, and the co-occurrence of novelty and usefulness claims lowers funding by about 26%. Our findings are encouraging because they suggest the crowd strongly supports novelty and usefulness. However, our findings are disappointing because the premise of crowdfunding is to support projects that are innovative, i.e. that are both novel and useful, rather than projects that are only novel or only useful.

Keywords: Crowdfunding, Entrepreneurship, Innovation


Departments: Marketing, GREGHEC (CNRS)

Although choosing from large assortments has often been found to be demotivating, a robust finding in the marketing literature is that consumers generally prefer larger product assortments. Standard explanations for this preference for larger assortments have focused on reason-based considerations revolving around large assortments enabling potentially “better” choices. This paper offers a different and novel, affect-based explanation. We argue that the relative preference for larger assortments is driven in part by the greater experience utility that consumers derive from reviewing such assortments. Because most products are carriers of positive affect, consumers tend to derive greater experience utility from reviewing larger assortments compared to smaller assortments. Support for this general proposition was found across four experimental studies using different strategies to document the role of affect-based experience utility in driving the preference for larger assortments. Theoretical and substantive implications are discussed.

Keywords: assortment size, affect, emotion, consumer decision making


Departments: Marketing, GREGHEC (CNRS)

Engaging in risky consumption behaviors (cigarettes, alcohol, etc.) is an acute societal problem that can have severe consequences for adolescents, and businesses in particular have been accused of making such consumption particularly appealing and accessible. However, the causes of risky behaviors are not well understood and research on the causes has been mixed. In this research, we investigate the effects of loneliness on adolescents’ adoption of risky behaviors. We test the proposition that adolescent loneliness affects the adoption of risky behaviors, but that this effect depends on the strategies that adolescents adopt to cope with their loneliness. In a large-scale study (n = 409) of adolescents (ages 13-18), we show support for a sequential mediation model in which active and passive coping strategies both mediate the effect of loneliness on risky behaviors, but with opposite effects. Active coping strategies reduce the adoption of risky behaviors, whereas passive coping strategies increase the adoption of risky behaviors. In addition, we show that active and passive coping strategies can be executed through consumption practices. Active coping strategies are positively associated with the sharing of possessions, whereas passive coping strategies are positively associated with product acquisition. We shed new light on both the bright and dark sides of materialism and risky behaviors, and provide practical implications for research on loneliness and business ethics.

Keywords: Loneliness, Coping strategies, Risky Behaviors, Adolescent consumers, Materialism, Sharing


Departments: Marketing, GREGHEC (CNRS)

After having made a purchase decision, consumers often revisit their choice and ponder forgone alternatives. This tendency can cause regret and lower satisfaction with the selected alternative, especially when choices are difficult. This paper introduces the concept of choice closure, defined as the psychological process by which consumers come to perceive a decision to be final. Choice closure inhibits consumers’ propensity to reconsider the decision process after a choice has been made and to engage in unfavorable comparisons between the chosen and the forgone options. Four studies show that physical acts that are metaphorically associated with the concept of closure — such as covering or turning a page on the rejected alternatives — trigger choice closure for choices made from large sets and result in greater satisfaction. These findings suggest that subtle cues, which do not alter the actual choice context, can improve consumers’ satisfaction with a difficult decision.


Departments: Marketing, GREGHEC (CNRS)

Thankfully, most product consumption experiences are positive. Unfortunately, however, those positive experiences are not always guaranteed to occur, and defects creep into the consumer experience. Though its assertion runs counter to most prescriptions, the current research proposes that exposing consumers to the mere possibility of these negative experiences, occurring in a consumption sequence increases consumers’ happiness with those experiences overtime. Six studies demonstrate this effect and further show that this effect is driven by hedonic responses as a result of favorable uncertainty resolution. That is, with the mere possibility of a negative experience, a consumer, who actually experiences a positive outcome, is likely to feel relief or pleasantness from not having to experience the negative experience. This research enriches existing literature on hedonic adaptation and uncertainty and has significant implications for consumer behavior.

Keywords: hedonic adaptation, happiness, uncertainty, favorable uncertainty resolution


Departments: Marketing, GREGHEC (CNRS)

Previous research suggests that when social exclusion is communicated in an explicit manner, consumers express preferences for helping, whereas when it is communicated in an implicit manner, they express preferences for conspicuous consumption. However, this may not always hold true. In the present research, we put forward a theoretical framework explaining that exclusion effects depend on the extent to which exclusion is communicated in a culturally normative or counter-normative manner, rather than whether it is communicated in an explicit or implicit manner. We show that exclusion communicated in a cultural norm-congruent manner produces preferences for helping, whereas exclusion communicated in a cultural norm-incongruent manner produces preferences for conspicuous consumption. We further show that the differential needs – self-esteem and power – threatened by normative and counter-normative exclusion explain these distinct preferences.


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