a reexamination of frequency depth effects in consumer price judgments previous research has shown that when there are multiple possible prices for two brands the brand that is discounted frequently but at shallow levels is perceived to have a lower average price than the brand that is discounted infrequently but at deeper levels the frequency effect however when there are only two possible prices for each brand the brand discounted infrequently but at deeper levels is perceived to have a lower average price the depth effect over a series of experiments we demonstrate that these frequency and depth effects do not generalize to other temporal price distributions

retailer pricing strategy and consumer choice under price uncertainty this research examines how consumers choose retailers when they are uncertain about store prices prior to shopping simulating everyday choice participants made successive retailer choices where on each occasion they chose a retailer and only then learned product prices the results of a series of studies demonstrated that participants were more likely to choose a retailer that offered an everyday low pricing strategy edlp or that offered frequent small discounts over a retailer that offered infrequent large discounts this choice advantage for the retailer that was cheaper more often manifested even when its average price was judged to be higher the same results were obtained when choices were made a day apart when price feedback was only given for the chosen retailer and when price feedback was given for both retailers participant s expectations of future prices but not their judgments of retailer s past average prices predicted their subsequent retailer choice

competitive maps the structure underlying asymmetric cross elasticities a special case of three mode factor analysis is used to portray the systematic structure underlying asymmetric cross elasticities for a broad class of market share attraction models analysis of the variation over retail outlets and weeks reveals competitive patterns corresponding to sales for the major brands in the market as well as patterns reflecting shelf price competition analysis of the brand domain results in a joint space one set of brand positions portrays how brands exert influence over the competition the other set of points portrays how brands are influenced by others the interset distances angles provide direct measures of competitive pressures maps are formed as spatial representations of each of the competitive patterns discovered

informing retirement savings decisions a field experiment on supplemental plans although supplemental saving plans can be an important part of an individual s financial security in retirement contribution rates remain low particularly among those with lower salaries and less education we report findings from an intervention that provided information on key aspects of the employer provided supplemental saving plans to older public employees in north carolina among workers participating in a supplemental plan individuals who received an informational flyer increased their contributions in the months following the intervention relative to the control group in contrast individuals who were not enrolled in a retirement saving plan were not moved to begin contributing to a supplemental plan the results suggest that informational interventions can induce workers who are already engaged in the saving process to reassess their level of retirement preparedness jel c93 d14 d9

purchasing power parity a quantitative reassessment of the 1920s experience abstract the purpose of this paper is to test the hypothesis of purchasing power parity the basic methodology is to start by estimating a general distributed lag equation relating the excchangr rate to its own past and to current and past relative price levels successively more restricted version are then proposed and tested against the general model two interesting facts come out of this one is that the proportionality restrictin is not supported by the data and the other is that all the models estimated by frenkel 1978 are rejected in favor of less restricted models

how individuals choose health insurance an experimental analysis an individual choosing a health insurance policy faces a complex decision environment where a large set of alternatives differ on a variety of dimensions there is uncertainty and the choice is repeated at least once a year we study decisions and decision strategies in a laboratory experiment where we create a controlled environment that closely mirrors this setting we use an electronic information board that allows to carefully monitor the individual s decision strategy the number of alternatives switching costs and the speed at which health deteriorates are varied across treatments we find that most subjects search is based more on attributes than on policies moreover we find that an increase in the number of alternatives increases decision making time makes subjects consider a lower fraction of the available information makes it more likely that subjects will switch and decreases the quality of their decisions the introduction of positive costs of switching makes people switch less often but improves the quality of their decisions finally if health deteriorates only gradually individuals tend to stick to their current policy too long

consumer evaluations of multiple versus single price change this article examines how consumer evaluations of multiple price changes differ from the evaluation of a single price change of an equal amount consistent with r thaler s theory about segregation versus integration of gains and losses we find that multiple price decreases are evaluated more favorably than a single price decrease and multiple price increases are evaluated more unfavorably than a single price increase however these effects are moderated by consumer price uncertainty and relative magnitude of the prices being evaluated because price uncertain consumers consider higher ranges of prices acceptable they are less unfavorable to multiple price increases and more favorable to multiple price decreases than certain consumers moreover when the magnitude of one price is very small relative to other prices consumers preference for multiple price decreases relative to a single price decrease is reduced however this effect is not found when there are price increases

a quantitative reassessment of the purchasing power parity hypothesis evidence from norway and the united kingdom summary annual data from norway and the united kingdom from 1874 to 1971 are used to reassess the empirical performance of the purchasing power parity ppp doctrine the simple version of the ppp relationship is supported by the data only if different short run dynamics during a floating rate period 1914 1928 is allowed for two sets of factors were found to be important in amending the simple ppp model these were short run cyclical variables affecting the adjustment towards the ppp equilibrium relationship and long run structural factors such as productivity and terms of trade within this expanded model the proportionality between the exchange rate and relative price levels could not be rejected

variety seeking through brand switching a concept of variety seeking behavior is modeled as a stochastic brand choice model the model yields a measure of variety seeking for each individual consumer panel data for 28 products are analyzed for each household and the possibility of market segmentation by variety seeking behavior is explored

five steps to planning success experimental evidence from us households while financial knowledge has been linked to improved financial behaviour there is lit tle consensus on the value of financial education in part because rigorous evaluation of various programmes has yielded mixed results however given the heterogeneity of financial education pro grammes in the literature focusing on generic financial education can be inappropriate and even mis leading lusardi 2009 and others argue that pedagogy and delivery matter significantly in this paper we design and field a low cost easily replicable financial education programme called five steps covering five basic financial planning concepts that relate to retirement we conduct a field experiment to evaluate the overall impact of five steps on a probability sample of the american population in different treatment arms we quantify the relative impact of delivering the programme through video and narrative formats our results show that short videos and narratives each takes about 3 minutes have sizeable short run effects on objective measures of respondent knowledge moreover keeping informational content relatively constant format has significant effects on other psychological levers of behavioural change effects on self efficacy are significantly higher when videos are used which ultimately influences knowledge acquisition follow up tests of respondents knowledge approximately 8 months after the interventions suggest that between one quarter and one third of the knowledge gain and about one fifth of the self efficacy gain persist thus this simple programme has effects both in the short run and medium run

participation in and contributions to 401 k pension plans evidence om plan data k plans differ from traditional employer sponsored pension plans in that employees are permitted to make voluntary pre tax contributions hence the sensitivity of participation and contributions to plan charac teristics notably the employer matching rate may play a critical role in retirement saving using plan level data from form 5500s filed annu ally with the internal revenue service ifind that substantial increases occur when an employer moves from a zero to a small or moderately sized match but that at higher match rates employee contributions fall

purchasing power parity in the long run a test of the dollar pound exchange rate 1890 1978 this paper tests the purchasing power parity ppp hypothesis by analyzing t he long run tendency of the dollar pound exchange rate using data sin ce 1890 two different models are considered 1 a na ive model and 2 a modified monetary model the conditions of propor tionality and symmetry cannot be rejected when using the naive model the final results using the monetary model however indicate that t he existence of permanent deviations from ppp cannot be ruled out copyright 1987 by ohio state university press

price induced patterns of competition this research focuses on how price changes influence the observed pattern of brand competition the paper begins with a basic utility model formulation and examines the implications of three major classes of preference distributions on the expected patterns of competition a price tier model is proposed to operationalize the theory and to allow predictive testing the price tier model is estimated on 28 brands across four product categories the results show a specific asymmetric pattern of price competition higher price higher quality brands steal share from other brands in the same price quality tier as well as from brands in the tier below however lower price lower quality brands take sales from their own tier and the tier below brands but do not steal significant share from the tiers above the results are consistent with a bimodal preference distribution with the regular price indifference point being located toward the lower quality end of the preference distribution for the categories analyzed

are americans saving optimally for retirement we solve each household s optimal saving decisions using a life cycle model that incorporates uncertain lifetimes uninsurable earnings and medical expenses progressive taxation government transfers and pension and social security benefits with optimal decision rules we compare household by household wealth predictions from the life cycle model using a nationally representative sample we find making use of household specific earnings histories that the model accounts for more than 80 percent of the 1992 cross sectional variation in wealth fewer than 20 percent of households have less wealth than their optimal targets and the wealth deficit of those who are undersaving is generally small

niching versus change of pace brands using purchase frequencies and penetration rates to infer brand positionings the authors examine deviations from ehrenberg s wi 1 bi equal to a constant law to infer the positioning of low share brands as niche versus change of pace brands results from empirical anal

employee financial literacy and retirement plan behavior a case study this article uses administrative data on all active employees of the federal reserve fr system to examine participation in and contributions to the thrift saving plan the system s defined contribution dc plan we link to administrative records a unique employee survey of economic demographic factors including a set of financial literacy questions not surprisingly fr employees are substantially more financially literate than the population at large most importantly financially savvy employees are also most likely to participate in their dc plan sophisticated workers contribute three percentage points more of their earnings to the dc plan than do the less knowledgeable and they hold more equity in their pension accounts we examine changes in employee plan behavior 1 year after employees completed a learning module about retirement planning and we compare it to baseline patterns we find that those employees who completed the learning module were more likely to start contributing and less likely to have stopped contributing to the dc plan postsurvey in sum employer provided learning programs are shown to significantly impact employee retirement saving decisions and consistent with a lot of other research higher levels of financial literacy are found to have a beneficial impact on retirement saving patterns jel j3 h7

the effect of forced choice on choice abstract whereas most academic and industry studies of consumer preferences and decision making involve forced choice i e participants are told to choose one of the presented product or service alternatives buyers usually also have the option not to select any alternative an implicit assumption in the experimental practice of forcing choice is that the no choice option draws proportionately from the various available alternatives such that the qualitative conclusions are unaffected however the authors propose that the no choice option competes most directly with alternatives that buyers tend to select when they are uncertain about their preferences building on this general proposition the authors show that the introduction of the no choice option strengthens the attraction effect weakens the compromise effect and decreases the relative share of an option that is average on all dimensions they also examine the mechanisms underlying the impact of having the option not to choose and the condi

can simple informational nudges increase employee participation in a 401 k plan we report results from a field experiment in which a randomized subset of newly hired workers at a large financial institution received a flyer containing information about the employer s 401 k plan and the value of contributions compounding over a career younger workers who received the flyer were significantly more likely to begin contributing to the plan relative to their peers in the control group many workers do not participate in their employers supplemental retirement savings programs even though these programs offer substantial tax advantages and immediate returns due to matching contributions from a survey of new hires we find that many workers choose not to contribute to the plan because they have other financial priorities however some nonparticipants lack the financial literacy to appreciate the benefit these findings indicate that simple informational interventions can nudge workers to participate in retirement saving plans and enhance individual well being and retirement income security

a consumer perspective on price matching refund policies effect on price perceptions and search behavior although price matching refund policies are common in many retail environments the impact of such policies on consumers has largely been ignored this article reports the results of three studies that examine price matching policies from a consumer perspective study 1 shows that consumers perceive price matching policies as signals of low store prices and that the presence of a refund increases the likelihood of discontinuing price search contrary to the predictions based on signaling theory in information economics studies 2 and 3 show that when search costs are low the number of stores searched increases in the presence versus absence of a price matching policy when search costs are high consumers appear to accept the price matching signal at face value and search less in the presence of a refund the article concludes by discussing the theoretical implications of the findings and suggesting directions for future research

the role of information and social interactions in retirement plan decisions evidence from a randomized experiment this paper analyzes a randomized experiment to shed light on the role of information and social interactions in employees decisions to enroll in a tax deferred account tda retirement plan within a large university the experiment encouraged a random sample of employees in a subset of departments to attend a benee ts information fair organized by the university by promising a monetary reward for attendance the experiment multiplied by more than e ve the attendance rate of these treated individuals relative to controls and tripled that of untreated individuals within departments where some individuals were treated tda enrollment e ve and eleven months after the fair was signie cantly higher in departments where some individuals were treated than in departments where nobody was treated however the effect on tda enrollment is almost as large for individuals in treated departments who did not receive the encouragement as for those who did we provide three interpretations differential treatment effects social network effects and motivational reward effects to account for these results

participation and investment decisions in a retirement plan the influence of colleagues choices abstract this paper investigates whether peer effects play an important role in retirement savings decisions we use individual data from employees of a large university to study whether individual decisions to enroll in a tax deferred account plan sponsored by the university and the choice of the mutual fund vendor for people who choose to enroll are affected by the decisions of other employees in the same department to overcome the identification problems we divide the departments into sub groups along gender status age and tenure lines and we instrument the average participation of each peer group by the salary or tenure structure in this group our results suggest that peer effects may be an important determinant of savings decisions

comparing dynamic consumer choice in real and computer simulated environments actual supermarket purchases made by consumers over a seven month period are compared with the choice decisions collected in one sitting in a laboratory simulation the laboratory simulation was designed to mimic the original market environment although there were systematic biases in predictions of true purchase behavior from the simulated data the compressed simulations were reasonably valid in predicting market shares and promotion sensitivity for brands across consumers

an alternative explanation for lower repeat rates after promotion purchases several authors have observed that average repeat rates are lower after a promotion purchase one interpretation of this result is that a media coupon or cents off promotion undermines the consumer

financial literacy financial education and downstream financial behaviors policy makers have embraced financial education as a necessary antidote to the increasing complexity of consumers financial decisions over the last generation we conduct a meta analysis of the relationship of financial literacy and of financial education to financial behaviors in 168 papers covering 201 prior studies we find that interventions to improve financial literacy explain only 0 1 of the variance in financial behaviors studied with weaker effects in low income samples like other education financial education decays over time even large interventions with many hours of instruction have negligible effects on behavior 20 months or more from the time of intervention correlational studies that measure financial literacy find stronger associations with financial behaviors we conduct three empirical studies and we find that the partial effects of financial literacy diminish dramatically when one controls for psychological traits that have been omitted in prior research or when one uses an instrument for financial literacy to control for omitted variables financial education as studied to date has serious limitations that have been masked by the apparently larger effects in correlational studies we envisage a reduced role for financial education that is not elaborated or acted upon soon afterward we suggest a real but narrower role for just in time financial education tied to specific behaviors it intends to help we conclude with a discussion of the characteristics of behaviors that might affect the policy maker s mix of financial education choice architecture and regulation as tools to help consumer financial behavior this paper was accepted by uri gneezy behavioral economics

effects of payment mechanism on spending behavior the role of rehearsal and immediacy of payments past expenses have been shown to influence future spending behavior by depleting available budgets however a prerequisite for this relationship is the accurate recall of past payments and the experiencing of the full aversive impact associated with them this article shows that the use of different payment mechanisms influences both these factors and hence moderates the effects of past payments on future spending specifically past payments strongly reduce purchase intention when the payment mechanism requires the consumer to write down the amount paid rehearsal and when the consumer s wealth is depleted immediately rather than with a delay immediacy two experiments show support for the proposed theoretical framework

effects of competitive context and of additional information on price sensitivity previous marketing research on the effects of price has tended to ignore the role of such moderating variables as competitive context and the availability of additional information the authors presented subjects with forced choice decisions in several product categories using a multinomial logit formulation to measure price sensitivity they find relatively lower price sensitivity 1 when a brand is placed at the upper price quality boundary of a choice set rather than in the middle 2 when only brand names are provided as opposed to only quality ratings and 3 when quality information is added to available brand name information they discuss the theoretical and managerial implications of these findings

the impact of product line extensions and consumer goals on the formation of price image abstract how do vertical product line extensions influence a retailer s price image conventional wisdom suggests that adding an upscale or downscale item to a product line has a directionally consistent impact on price image such that upscale extensions increase price image and downscale extensions decrease price image in contrast this research argues that vertical extensions can have the opposite effect such that upscale extensions can decrease rather than increase price image and vice versa for downscale extensions the authors further propose that the impact of vertical extensions on price image is a function of consumer goals and in particular whether consumers have the intent of browsing or buying the authors test these predictions in a series of five empirical studies that offer converging evidence in support of the proposed theory

an empirical analysis of internal and external reference prices using scanner data single source yogurt data are used to examine whether both internal and external reference prices affect purchase decisions internal reference prices are memory resident prices based on actual fair or other price concepts external reference prices are observed stimuli such as regular prices that stores may display along with a sale price for comparability discrete choice models with variables representing the two types of reference prices are estimated and both types of variables are found to have significant effects on purchase probabilities this suggests that consumers may use multiple reference points in evaluating price in purchase decisions in addition a model using an indicator of a sale price discount explains purchase probabilities as well as one that models the actual discount which suggests that consumers may be reacting to the indication of savings rather than to the amount of the discount

the influence of prior beliefs frequency cues and magnitude cues on consumers perceptions of comparative price data a widespread practice in grocery store advertising is to compare the advertised store s prices to a competitor s prices on multiple items an important but largely unexplored issue is how this information is processed and used in conjunction with prior beliefs to influence price perceptions in our initial studies we manipulated prior beliefs and two data based cues frequency of price advantage and magnitude of price advantage to determine their relative influence on consumer price perceptions results indicate that prior beliefs affected price perceptions but that the frequency cue exerted a dominating influence several follow up studies demonstrate the robustness of this phenomenon across a variety of presentational and instructional conditions

integration of serially sampled price information modeling and some findings focusing on the perceived value of an observed basket of items as the dependent variable the article suggests several rival models of integrating serially sampled price information within this context perceptual implications of different discount structures are noted also a computer controlled laboratory experiment is reported that attempts to provide guidance for subsequent studies that may compare the suggested models the results suggest that 1 store profile effects persist after exposure to price information 2 primacy effects are statistically significant but not strong and 3 a large number of noticeable discounts lead to a higher perceived value than a small number of extreme discounts

effects of price promotions on variety seeking and reinforcement behavior a stochastic model is proposed to examine how changes in frequency of price discounts affect brand choice decisions of consumers who exhibit variety seeking and reinforcement behavior it is shown that the effect on choice depends on whether the brand offering discounts is a major or minor brand in the product category this model extends the existing literature on stochastic models of variety seeking behavior by explicitly incorporating switching due to promotions along with intrinsic switching due to variety seeking the model yields testable hypotheses which are supported in a laboratory experiment and on analyses of the iri cracker data

a model of balanced choice behavior in some product categories consumers appear to alternate among items in a consistent and purposeful though not entirely deterministic fashion such alternation occurs even in the absence of any apparent external influences on choice to explain such balanced choice behavior we present a model based upon the premise that past consumption influences the utility of items on subsequent choice occasions individuals may seek variety on certain product attributes and exhibit loyalty toward others the model specification yields a logit choice model which may be calibrated using consumption diary panel data at the individual or cross sectional level

optimal defaults and active decisions defaults often have a large influence on consumer decisions we identify an overlooked but practical alternative to defaults requiring individuals to make an explicit choice for themselves we study such active decisions in the context of 401 k saving we find that compelling new hires to make active decisions about 401 k enrollment raises the initial fraction that enroll by 28 percentage points relative to a standard opt in enrollment procedure producing a savings distribution three months after hire that would take 30 months to achieve under standard enrollment we also present a model of 401 k enrollment and derive conditions under which the optimal enrollment regime is automatic enrollment i e default enrollment standard enrollment i e default non enrollment or active decisions i e no default and compulsory choice active decisions are optimal when consumers have a strong propensity to procrastinate and savings preferences are highly heterogeneous financial illiteracy however favors default enrollment over active decision enrollment