unfixed resources perceived costs consumption and the accessible account effect consumption depletes one s available resources but consumers may be unaware of the total resources available for consumption and therefore be influenced by the temporary accessibility of resource accounts consistent with this possibility consumers in four experiments perceived a unit of consumption to be smaller and consequently consumed more when large resource accounts of money calories or time e g the money in their savings account were made temporarily accessible compared with when small resource accounts were made temporarily accessible e g the money in their wallet manipulating the cognitive accessibility of resources available for consumption influences both subjective judgment and behavior

a reference dependent approach to wtp for priority abstract this article introduces the notions of reference dependence and loss aversion to the analysis of waiting times in tourism to examine their effects on people s willingness to pay wtp the empirical study carried out using quantile regression confirms that visitors to theme parks who are willing to pay a high price for express passes are reference dependent their wtp for an express pass is influenced by the difference between the expected waiting time and the perceived waiting time and loss averse a loss in waiting time i e waiting longer than expected has a greater effect on wtp as this loss is more annoying than an equal sized gain in waiting time being satisfying the implications of these findings for the literature on waiting in services are considered

the influence of price discount framing on the evaluation of a product bundle bundle offers consisting of two or more products often include a price discount the impact of the price discount on the perceived attractiveness of the bundle has been shown to depend on which product is discounted it has been argued that discounts are more effective when they are assigned to the product that will receive the most weight in the overall evaluation of the bundle we propose that the perceived value of the discount may also depend on a referent specific to each product six studies are used to provide evidence that 1 price discount framing effects can be explained by reference dependence and 2 that reference dependence and product importance independently contribute to price discount framing effects

a non unitary discount rate model we develop a simple macroeconomic model in which agents discount their utility from consumption and the utility from leisure at different rates under this setting time inconsistency emerges for the preferences of agents moreover the time inconsistency problem generates two types of inefficiencies intratemporal and intertemporal we examine the welfare effects of savings subsidy and consumption tax the effects of taxation in our model are quite different from those in the standard model if the discount rate for consumption is higher lower than that for leisure today s self cares less more about the consumption of the future selves than the leisure of the future selves depressing stimulating the consumption of future selves improves the utility of today s self hence a positive negative consumption tax rate improves the utility level of all selves

the pricing of forward contracts for foreign exchange this paper investigates the nature of observed deviations from the unbiased expectations hypothesis in the forward foreign exchange market if these deviations are due to risk premia then the same premia should be observed in nominal bonds denominated in different currencies this condition imposes testable restrictions on the parameters of a multivariate regression model the empirical results are consistent with a world in which time varying risk premia cause the observed deviations from unbiased expectations

seller beware how bundling affects valuation abstracthow does bundling affect valuation this research proposes the asymmetry hypothesis in the valuation of bundles consumers demand more compensation for the loss of items from bundles compared with the loss of the same items in isolation yet they express lower willingness to pay for items added to bundles compared with the same items purchased separately this asymmetry persists because bundling causes consumers to perceive multiple items as a single inseparable gestalt unit thus consumers resist altering the whole of the bundle by removing or adding items six studies demonstrate this asymmetry across judgments of monetary value studies 1 and 2 and dis satisfaction study 3 moreover bundle composition the ability of different items to create the impression of a whole moderates the effect of bundling on valuation study 4 and the need to replace missing items i e restoring the whole mediates the effect of bundling on compensation demanded for losses study 5 finally the a

consumption self control by rationing purchase quantities of virtue and vice consumers attempts to control their unwanted consumption impulses influence many everyday purchases with broad implications for marketers pricing policies addressing theoreticians and practitioners alike this paper uses multiple empirical methods to show that consumers voluntarily and strategically ration their purchase quantities of goods that are likely to be consumed on impulse and that therefore may pose self control problems for example many regular smokers buy their cigarettes by the pack although they could easily afford to buy 10 pack cartons these smokers knowingly forgo sizable per unit savings from quantity discounts which they could realize if they bought cartons by rationing their purchase quantities they also self impose additional transactions costs on marginal consumption which makes excessive smoking overly difficult and costly such strategic self imposition of constraints is intuitively appealing yet theoretically problematic the marketing literature lacks operationalizations and empirical tests of such consumption self control strategies and of their managerial implications this paper provides experimental evidence of the operation of consumer self control and empirically illustrates its direct implications for the pricing of consumer goods moreover the paper develops a conceptual framework for the design of empirical tests of such self imposed constraints on consumption in consumer goods markets within matched pairs of products we distinguish relative virtue and vice goods whose preference ordering changes with whet her consumers evaluate immediate or delayed consumption consequences for example ignoring long term health effects many smokers prefer regular relative vice to light relative virtue cigarettes because they prefer the taste of the former however ignoring these short term taste differences the same smokers prefer light to regular cigarettes when they consider the long term health effects of smoking these preference orders can lead to dynamically inconsistent consumption choices by consumers whose tradeoffs between the immediate and delayed consequences of consumption depend on the time lag between purchase and consumption this creates a potential self control problem because these consumers will be tempted to over consume the vices they have in stock at home purchase quantity rationing helps them solve the self control problem by limiting their stock and hence their consumption opportunities such rationing implies that per purchase occasion vice consumers will be less likely than virtue consumers to buy larger quantities in response to unit price reductions such as quantity discounts we first test this prediction in two laboratory experiments we then examine the external validity of the results at the retail level with a field survey of quantity discounts and with a scanner data analysis of chain wide store level demand across a variety of different pairs of matched vice regular and virtue reduced fat calorie or caffeine etc product categories the analyses of these experimental field and scanner data provide strong convergent evidence of a characteristic crossover in demand schedules for relative vices and virtues for categories as diverse as among others potato chips chocolate chip cookies cream cheese beer soft drinks ice cream and frozen yogurt chewing gum coffee and beef andturkey bologna vice consumers demand increases less in response to price reductions than virtue consumers demand although their preferences are not generally weaker for vices than for virtues constraints on vice purchases are self imposed and strategic rather than driven by simple preferences we suggest that rationing their vice inventories at the point of purchase allows consumers to limit subsequent consumption as a result of purchase quantity rationing however vice buyers forgo savings from price reductions through quantity discounts effectively paying price premiums for the opportunity to engage in self control thus purchase quantity rationing vice consumers are relatively price in sensitive from a managerial and public policy perspective our findings should offer marketing practitioners in many consumer goods industries new opportunities to increase profits through segmentation and price discrimination based on consumer self control they can charge premium prices for small sizes of vices relative to the corresponding quantity discounts for virtues virtue consumers on the other hand will buy larger amounts even when quantity discounts are relatively shallow a key conceptual contribution of this paper lies in showing how marketing researchers can investigate a whole class of strategic self constraining consumer behaviors empirically moreover this research is the first to extend previous theoretical work on impulse control by empirically demonstrating its broader implications for marketing decision making

bootstrapping the probability distribution of peak electricity demand demand for effective capacity planning an electric utility requires an estimate of the probability distribution of future maximum demand rather than simply a point prediction of expected peak this paper proposes a method of obtaining this using the bootstrapping technique of b efron 1979 and this is applied to the peak demand of an actual utility ontario hydro while the technique is constructed from the standard procedure of forecasting a future variable using regression coefficients and known values for the right hand side variables it is modified to allow for uncertainty in these independent variable forecasts as well copyright 1987 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

opportunity cost neglect to properly consider the opportunity costs of a purchase consumers must actively generate the alternatives that it would displace the current research suggests that consumers often fail to do so even under conditions promoting cognitive effort various cues to consider opportunity costs reduce purchase rates and increase the choice share of more affordable options sensitivity to such cues varies with chronic dispositional differences in spending attitudes we discuss the implications of these results for the marketing strategies of economy and premium brands

financial deprivation prompts consumers to seek scarce goods consumers assess their well being subjectively largely by comparing the present state of their lives to the state of comparable others and to their own state earlier in time the authors suggest that consumers similarly assess their financial wellbeing and when these evaluations highlight a deficit in their financial position they pursue strategies that mitigate the associated sense of financial deprivation specifically consumers counteract the relative deficit in their financial resources by acquiring goods that are consequently unavailable to other consumers in their environment the results from five studies suggest that the inferiority and unpleasant affect associated with financial deprivation motivates consumers to attend to choose and consume scarce goods rather than comparable abundant goods these effects diminish when scarce goods are limited because other people have already obtained them and when consumers attribute their unpleasant feelings to a source unrelated to financial deprivation

breath testing in canada deterrence or detection the purpose of this paper is to estimate the effect of the preliminary breath test law on drunk driving in canada using an annual time series of provincial cross sectional data consisting of six provinces from 1952 to 1988 it is found that the law seems to have a negative effect on non alcohol specific fatality and fatal accident rates however the estimate of the effect is sensitive to model pecifications perhaps due to high multicollinearity among variables but the law seems to have a positive effect on the alcohol specific fatal accident rate using data from the province of ontario for the period 1954 88 our interpretation is that the breath test law has two simultaneous effects on drunk driving deterrence and detection effects the results suggest that the deterrence effect is weak and the detection effect is dominating one robust result is that the real beer price has a negative effect on drunk driving traffic accidents

transaction decoupling how price bundling affects the decision to consume abstract in today s marketplace price bundling is widespread manufacturers and retailers routinely offer multiple products for a single bundled price although the effects of price bundling on purchase behavior have been well researched the effects of price bundling on postpurchase consumption behavior have received almost no attention in this article the authors build on the sunk cost literature e g thaler 1980 1985 and predict that price bundling leads to a disassociation or decoupling of transaction costs and benefits thereby reducing attention to sunk costs and decreasing a consumer s likelihood of consuming a paid for service e g a theater performance four studies show this to be the case in two lab studies the authors show that having a bundled four day ski pass as opposed to four one day ski tickets decreases a person s likelihood of skiing on the final day of a four day ski vacation they replicate this result in a field study showing that multiperformance ticket holders are

smoking wealth accumulation and the propensity to plan abstract we investigate the relationship between wealth smoking and individual propensities to plan planning propensity affects wealth but not smoking suggesting that planning is not an all purpose skill financial planning may draw on different abilities than those that facilitate smoking cessation

gaussian demand and commodity bundling in an important and widely cited essay adams and yellen 1976 examine the use of package selling as a price discrimination device they consider a monopolist producing two goods with constant unit costs and facing buyers with diverse tastes the marginal utility of a second unit of either good is assumed to be zero for all buyers the two goods are independent in demand for all buyers so that any buyer s reservation price for the first unit of either good is independent of the market price of the other thus the maximum amount any buyer would pay for a bundle consisting of one unit of each good is the sum of the two reservation prices and buyers are completely described by the values of those two prices 2 resale markets are assumed away in order to obtain comparative results for alternative pricing strategies the distribution of reservation prices in the adams yellen framework is assumed to be bivariate normal implications of gaussian demand are explored pure bundling is shown to operate by reducing buyer diversity thus facilitating the capture of consumers surplus it generally makes buyers worse off than unbundled sales it is more profitable if average reservation prices are high enough mixed bundling combines advantages of both pure bundling and unbundled sales and it is generally strictly more profitable than either bundling which treats goods symmetrically seems most attractive under symmetric reservation price distributions i am indebted to severin borenstein for superb research assistance to the ford motor company for research support through a grant to m i t and to the harvard economics department for housing me as a visiting scholar while most of this research was performed of course only i can be held responsible for this essay s shortcomings 1 the first clear recognition of this possibility seems to have been by stigler 1968 but also see burstein 1960 2 paroush and peles 1981 relax the assumption that consumers purchase at most one unit of each good but they consider only two types of buyers both with linear demand functions they retain the assumption that demands are independent for all buyers telser 1979 and phillips 1981 use different frameworks to analyze bundling policies spence 1980 explores the relation between bundling across commodities as here and bundling multiple units of the same

procrastination of enjoyable experiences abstract the tendency to procrastinate applies not only to aversive tasks but also to positive experiences with immediate benefits the authors propose that models of time discounting can explain this behavior and they test these predictions with field data and experiments a multicity study shows that people with unlimited time windows delay visiting desirable landmarks however procrastination is reduced when the window of opportunity is constrained similarly people procrastinate in redeeming gift certificates and gift cards with long deadlines more than those with short deadlines resulting in overall lower redemption rates these results run counter to participants predictions and typical models of impulsive behavior

if homo economicus could choose his own utility function would he want one with a conscience reply in my model of the evolution of honesty 1 i assumed the existence of a signal a blush perhaps extreme values of which served to identify some individuals as being honest with certainty joseph harrington notes that without this assumption honest individuals have difficulty invading a population initially dominated by defectors for readers who do not wish to work through the algebra in his comment the argument is easily summarized in nontechnical terms suppose two honest mutants a and b arrive in an uncountably large population consisting entirely of dishonest persons and suppose that the probability that an honest person exhibits an intense blush is say 0 999 while the corresponding probability for everyone else is only 0 001 when a sees an intense blush on the face of b what will then be his estimate of the probability that b is honest assuming that a knows the laws of elementary probability and corrects for the base rate of honest persons in the population it will be zero when virtually everyone in the population is dishonest even a person with an intense blush will be pegged as dishonest provided that even the smallest fraction of dishonest persons also shows an intense blush with

the intertemporal dynamics of consumer lock in this article examines how dynamic changes in information cost structure and time preferences affect consumers search and switching behavior over time and lead to lock in the information cost structure is conceptualized as a trade off of initial setup costs and ongoing usage costs lock in is defined as consumers decreased propensity to search and switch after an initial investment which is determined both by a preference to minimize immediate costs and by an inability to anticipate the impact of future switching costs the results of three experiments support the proposed mechanism experiment 1 shows that a small initial investment is sufficient to produce lock in experiment 2 shows that the results of a prior investment on lock in are not due to psychological commitment but to a shift in relative costs of incumbent and new options experiment 3 shows that respondents fail to anticipate how their prior investment will lock them in

bootstrapping for standard errors of instrumental variable estimates abstract theil and finke 1983 used the distance from the equator as an instrumental variable iv in the estimation of a cross country demand system here we obtain standard errors of the iv estimates using efron s 1979 bootstrap technique

conjoint analysis of price premiums for hotel amenities over the past decade or so conjoint analysis green and rao 1971 johnson 1974 appears to have become one of industry s most widely applied marketing research techniques for estimating consumer s multi attribute utility functions cattin and wittink 1982 however a continuing problem in application of conjoint analysis is how to handle the price attribute in the construction of stimulus profiles for presentation to respondents in many cases of practical interest the price level will be highly correlated with other product attribute levels if the researcher ignores this correlation by allowing the price levels to vary independently of other attributes the resulting profiles may appear sufficiently unrealistic to result in respondents discounting each profile s attractiveness thus reducing the validity of the results a related problem which adds to the complexity of new product pricing research is the bundling issue in the context of conjoint analysis the question is whether one can predict a respondent s evaluation of a bundle of product attributes and price as a simple linear function of the summed part worths of the entities making up the bundle when each entity is presented with its actual price metric hybrid conjoint models have received a fair amount of industry application to date the purpose of these models is to reduce data collection time while still retaining individual differences in part worth functions the present paper extends this class of models to include categorical conjoint analysis in which the criterion variable is classificatory this model is applied to an extremely large conjoint problem involving over 40 attributes and over 100 attribute levels the study results support the viability of the model for dealing with extremely large conjoint problems the study also shows evidence of the inability of simple functions of self explicated utilities for components of a bundle of hotel amenities to predict respondents preferences for the total bundle journal of business 1984 vol 57 no 1 pt 2 1984 by the university of chicago all rights reserved 0021 9398 84 5712 0019 0 1 50

how buyers perceive savings in a bundle price an examination of a bundle s transaction value although bundling the selling of two or more products and or services at a single price has a history of economic research marketing oriented investigations have appeared only recently this pap

the effect of plausible and exaggerated reference prices on consumer perceptions and price search this article examines whether advertisers regular price claims affect consumer perceptions and price search behavior experiments involving simulated shopping via personal computers indicate that compared to an ad with no reference price an ad with a plausible reference price raised subjects estimates of the advertiser s regular price and the perceived offer value an exaggerated reference price had generally the same positive effects on perception as a plausible reference price even for the more skeptical subjects further when subjects were presented with an advertised sale price above the lowest expected price the exaggerated reference price increased the percentage of subjects who purchased the product from the advertiser without checking other stores prices

estimating the wetland rental fee a case study involving a taiwan wetland wetlands provide many functions that are both economic and recreational and are valuable in terms of their ecological diversity while at the same time being nonmarket value products the purpose of this study is to estimate the optimal wetland rental through estimations of both the demand and supply functions in relation to wetland the wetland supply function is directly estimated based on the data provided by the owners of the wetland while the estimation of the wetland input demand function involves using the bootstrapping and contingent visitation approaches such estimation approaches could also be applied to other nonmarket value products that give rise to environmental externalities the estimation of rental fee could provide a long term leasing contract that gives the landlord with a particular rent to lease their lands to support a wetland eco tourism park to maintain wetland for substantial management several environmental management policy implications are also addressed

eliciting time versus money time scarcity underlies asymmetric wage rates marketing strategies are often tied to how consumers spend time e g waiting in lines searching across stores in return for money e g receiving a discount viewing such time money tradeoffs in terms of a reservation wage rate for consumers we identify a wage rate asymmetry between two elicitation procedures a money elicit mel state the minimum amount of money m that you would accept in return for spending a given number of hours t and b time elicit tel state the maximum number of hours t that you would spend in return for accepting a given amount of money m while these procedures are normatively equivalent we propose that tel vs mel wage rates are higher because time scarcity receives a higher weight in tel judgments in eight studies including both hypothetical and real settings we document the wage rate asymmetry the time scarcity process and a downstream consequence of tel vs mel reducing the likelihood of accepting a time money tradeoff we discuss the implications for practice and for research on wage rates time versus money procedural invariance and scarcity

an economic theory of self control the concept of self control is incorporated in a theory of individual intertemporal choice by modeling the individual as an organization the individual at a point in time is assumed to be both a farsighted planner and a myopic doer the resulting conflict is seen to be fundamentally similar to the agency conflict between the owners and managers of a firm both individuals and firms use the same techniques to mitigate the problems which the conflicts create this paper stresses the implications of this agency model and discusses as applications the effect of pensions on saving saving and the timing of income flows and individual discount rates

price promotions cause impatience in this research the authors propose that incidental exposure to price promotions can cause downstream impatience in an unrelated domain specifically price promotions trigger reward seeking a ge

cultural differences in consumer impatience abstract in this article the authors examine cross cultural variations in how people discount the future specifically they predict that people from western cultures are relatively less patient and therefore discount the future to a greater degree than do people from eastern cultures and thus westerners value immediate consumption relatively more furthermore on the basis of regulatory focus theory the authors predict that when easterners are faced with the threat of a delay in receiving a product i e a prevention loss they are more impatient whereas when westerners are faced with the threat of not being able to enjoy a product early i e a promotion loss their impatience increases this enhanced impatience manifests in preference for expedited consumption of a product purchased online in two studies in both studies the authors used a priming methodology on bicultural singaporean participants the results support the predictions in the second study they also found evidence in support

keeping your gains close but your money closer the prepayment effect in riskless choices abstract although research on loss aversion now spans more than three decades researchers are still debating whether or in which cases the finding holds true for money we contribute to this debate by exploring how prepayment affects financial decisions in one set of experiments we show that when faced with a tradeoff between post and prepayment participants overvalue prepaid money and sometimes even prefer it over objectively higher gains importantly this effect was more pronounced when prepayment was more distant from its pure representation in dollars and cents experiment 1a as well as when potential losses were directly linked to specific options experiment 1b as far as the processes involved our results suggest that prepayment leads to increased personal commitment to prepaid options experiment 1c in a second set of experiments we show that even when the tradeoff element is eliminated participants are more motivated and engaged in a task that is prepaid rather than post paid experiments 2a and 2b based on our findings we discuss how firms can use prepayment mechanisms to get more out of their agents and how individuals can be motivated to better utilize their money

the deterrent effect of capital punishment evidence from a judicial experiment i introduction the contemporary debate over capital punishment involves a number of important arguments based on either moral principles or social welfare considerations the primary social welfare issue viewed as the most important single consideration for both sides in the death penalty controversy is whether capital punishment deters capital crimes see for example zimring and hawkins 1986 this issue is also of great interest to several states that are currently considering a change in their death penalty laws 1 psychologists and criminologists studied the death penalty initially and reported no deterrent effect see for example sellin 1959 and eysenck 1970 economists joined the debate later with ehrlich s 1975 and 1977 studies that report a significant deterrent effect applying regression analysis to u s aggregate data for 1933 69 and state level data for 1940 and 1950 ensuing studies use either ehrlich s data with different regression specifications different regressors functional form or endogenous variables or postmoratorium data with a variant of ehrlich s regression model results range from a substantial deterrent effect to no effect or a small adverse effect 2 this study uses a new approach to advance the deterrence literature we exploit an important characteristic that other studies have not considered the experimental nature of the moratorium that the supreme court imposed on executions during the 1970s the moratorium can be viewed as an exogenously imposed judicial experiment the experiment s effect on murder rates provides evidence about the deterrent effect of capital punishment we compare the murder rate for each state immediately before and after it suspended or reinstated the death penalty many factors that affect crime for example law enforcement judicial demographic and economic variables change only slightly over a short period of time therefore changes in a state s murder rate quickly following a change in its death penalty law can be attributed to the legal change also there are considerable cross state variations in the timing and duration of the moratorium that began and ended in different years in different states ranging from four to thirty years see tables 1 and 2 3 these variations can strengthen our comparison based inference because observing similar changes in murder rates immediately after the same legal change in different years and in various states provides compelling evidence of the moratorium s effect on murder moreover our analysis benefits from the experiences of the states that suspended and reinstated their death penalty statutes several times 4 for states that experience similar murder rate changes after suspensions or reinstatements in different crime economic and demographic environments the contribution of the legal change to murder is paramount we supplement the before and after comparisons with time series and panel data regression analyses unlike most existing studies we use both pre and postmoratorium data the regressions disentangle the effect of having death penalty laws on murder from the effect of actual executions on murder basing our inference on two different approaches allows us to corroborate our findings and also detract from the modeling concerns voiced at previous studies that use only regression analysis we also apply a battery of tests to examine the robustness of the findings these include regression sensitivity checks with 89 additional regression equations that differ from our base models in regressors functional form data and estimation method in addition we test whether the moratorium has an effect on property crimes that are not punishable by death if the relationship between the moratorium and these crimes is similar to the relationship between the moratorium and murder then we should suspect that murder rate changes are the result of broader trends in criminal behavior affecting all crimes

to know and to care how awareness and valuation of the future jointly shape consumer spending reducing spending in the present requires the combination of being both motivated to provide for one s future self valuing the future and actively considering long term implications of one s choices awareness of the future feeling more connected to the future self thinking that the important psychological properties that define your current self are preserved in the person you will be in the future helps motivate consumers to make far sighted choices by changing their valuation of future outcomes e g discount factors however this change only reduces spending when opportunity costs are considered correspondingly cues that highlight opportunity costs reduce spending primarily when people discount the future less or are more connected to their future selves implications for the efficacy of behavioral interventions and for research on time discounting are discussed

how fragile are fragile inferences a re evaluation of the deterrent effect of capital punishment extreme bounds analysis attempts to measure the effects of the uncertainty in the specification of the explanatory variables in a regression model on the estimated coefficients of interest standard errors for the stochastic extreme bounds are computed using the bootstrap technique state by state cross section data are used to study the deterrent effect of capital punishment in the united states in 1950 the bootstrap standard errors are sufficiently large for some bounds to suggest caution in the interpretation of the empirical results regarding the fragility of inferences for the deterrent effect of capital punishment copyright 1989 by mit press

bootstrapping confidence intervals an application to forecasting the supply of pork the article demonstrates how the distribution free method of bootstrapping can be applied to the construction of confidence intervals for forecasts generated by a dynamic econometric model because the exogenous variables must be forecast the forecasts of the dependent variable are functions of stochastic forecast period exogenous variables a dynamic model of pork supply is used to illustrate the procedure

we will be right with you managing customer expectations with vague promises and cheap talk delay announcements informing customers about anticipated service delays are prevalent in service oriented systems how delay announcements can influence customers in service systems is a complex problem that depends on both the dynamics of the underlying queueing system and on the customers strategic behavior we examine this problem of information communication by considering a model in which both the firm and the customers act strategically the firm in choosing its delay announcement while anticipating customer response and the customers in interpreting these announcements and in making the decision about when to join the system and when to balk we characterize the equilibrium language that emerges between the service provider and her customers the analysis of the emerging equilibria provides new and interesting insights into customer firm information sharing we show that even though the information provided to customers is nonverifiable it improves the profits of the firm and the expected utility of the customers the robustness of the results is illustrated via various extensions of the model in particular studying models with incomplete information on the system parameters allows us also to highlight the role of information provision in managing customer expectations regarding the congestion in the system further the information could be as simple as high congestion low congestion announcements or it could be as detailed as the true state of the system we also show that firms may choose to shade some of the truth by using intentional vagueness to lure customers

opportunity cost consideration normatively consumers should incorporate opportunity costs into every decision they make yet behavioral research suggests that consumers consider them rarely if at all this research addresses when consumers consider opportunity costs who considers opportunity costs which opportunity costs spontaneously spring to mind and what the consequences of considering opportunity costs are perceived constraints cue consumers to consider opportunity costs and consumers high in propensity to plan consider opportunity costs even when not cued by immediate constraints the specific alternatives retrieved and the likelihood of retrieval are functions of category structures in memory for a given resource some uses are more typical of the category of possible uses and so are more likely to be considered as opportunity costs consumers who consider opportunity costs are less likely to buy focal options than those who do not when opportunity costs are appealing but no less likely when opportunity costs are unappe

sophistication and the persistence of cooperation abstract sophistication is costly in an evolutionary framework using replicator dynamics this fact is instrumental in explaining the persistence of cooperation in joint venture situations with prisoner s dilemma characteristics without relying on any reciprocity argument moreover the asymptotically stable equilibrium is symbiotic with co existence of cooperation defection and cautious cooperation very much like what we observe in reality

how buyers evaluate product bundles a model of anchoring and adjustment how do buyers evaluate a bundle of items the most common approach in earlier economic analyses see e g adams and yellen 1976 schmalensee 1984 was to start with the additivity assumption the overall utility of a bundle equals the sum of the bundle items individual utilities the restrictiveness of this additivity assumption was later recognized and removes dansby and conrad 1984 guiltinan 1987 hanson and martin 1990 however the question of how buyers evaluation processes may account for additivity or a lack thereof has remained largely unexplored

adding asymmetrically dominated alternatives violations of regularity and the similarity hypothesis an asymmetrically dominated alternative is dominated by one item in the set but not by another adding such an alternative to a choice set can increase the probability of choosing the item that dominates it this result points to the inadequacy of many current choice models and suggests product line strategies that might not otherwise be intuitively plausible

the value of time ten studies are used to document that time is valued in accordance with a double kinked value function there is a zone of indifference for small time gains losses increasing marginal utility disutility for moderate time gains losses and diminishing marginal utility disutility for large time gains losses moderate amounts of time exhibit increasing marginal utility disutility because larger blocks of time provide a more diverse set of usage opportunities it is only when it is difficult to imagine how more less time would be beneficial detrimental that there is diminishing marginal utility disutility for time thus time valuation shows increasing marginal utility when there is a time deficit but diminishing marginal utility when there is a time surplus these findings have implications for how other resources might be valued

short run and long run elasticities for canadian consumption of alcoholic beverages an error correction mechanism cointegration approach elasticities for beer wine and spirits are estimated for each of the provinces of canada over the period 1956 83 using unrestricted dynamic regressions modeled after the error correction mechanism alternative long run estimates are also obtained from cointegrating regressions estimates vary markedly across provinces and suggest that increases in price will reduce consumption of all beverages in the short run but in the long run no evidence is found that spirits use is price sensitive increases in the legal drinking age reduce consumption in the short run but there is little indication of a long run effect the estimated income elasticity of beer is small while the estimated income elasticities for spirits and wine are substantially larger especially in the long run coauthors are ernest h oksanen michael r veall and deborah fretz copyright 1992 by mit press

eliciting prospect theory when consequences are measured in time units time is not money we elicited the prospect theory components utility probability weighting and loss aversion when consequences are expressed as the time dedicated to a specific task or activity a similar elicitation was performed for monetary consequences to allow an across attribute time money comparison of the elicited components at the individual level we obtained less concave utility and smaller loss aversion for time than for money moreover while the probability weighting was predominantly inverse s shaped for both attributes it was less sensitive to probabilities and more elevated for time than for money this finding implies more optimism for gains and more pessimism for losses this paper was accepted by peter wakker decision analysis

travel configuration on consumer trip chained store choice we predict that in evaluating alternative equidistant trip chains i e the combining of multiple destinations into a single outing consumers will choose trip chains where destinations are more clustered i e closer to each other and further from the origin over equidistant trip chains where destinations are less clustered but closer to the origin this prediction is based on the assumptions of diminishing marginal sensitivity and reference point dependence postulated by reference dependent theory results of the first experiment provide support for this prediction results of the second experiment provide evidence that trip chain configuration affects route choice via both facets of reference dependent theory

spending on daughters versus sons in economic recessions although parents often try not to favor one child we examine whether specific environmental factors might bias parents to favor children of one sex over the other this research draws on theory in evolutionary biology suggesting that investment in female versus male offspring depends on resource availability applying this to consumers a series of experiments show that poor economic conditions favor resource allocations to daughters over sons for example poor conditions led people to bequeath more assets to girls in their will and to choose girls to receive a us treasury bond and a beneficial extracurricular activity it is proposed that this happens because spending on children represents a reproductive investment and that boys and girls relative reproductive value varies with economic conditions supporting this account perceptions of which child will have more children statistically mediates the effect of economic conditions on preferences for girls consequently the effect is strengthened as a child approaches reproductive age and it is moderated by individual differences risk aversion and monogamy directly related to our theoretical model this research contributes to the consumer behavior literature by revealing how why and when environmental factors influence spending on girls versus boys

the devaluation effect activating a need devalues unrelated objects it is commonly assumed that an object capable of satisfying a need will be perceived as subjectively more valuable as the need for it intensifies for example the more active the need to eat the more valuable food will become this outcome could be called a valuation effect in this article we suggest a second basic influence of needs on evaluations that activating a focal need e g to eat makes objects unrelated to that need e g shampoo less valuable an outcome we refer to as the devaluation effect two existing studies support the existence of a devaluation effect using manipulations of the need to eat and to smoke and measuring attractiveness of consumer products and willingness to purchase raffle tickets furthermore the evidence suggests that consumers are not aware of the devaluation effect and its influence on their preferences

identification and estimation of money demand in most natural sciences physics chemistry biology theories are validated by controlled experiment however in other natural sciences astronomy meteorology and in most social sciences including economics the data are characteristically generated not by experiment but by measurement of uncontrolled systems in economics theories take the form of restrictions on the models assumed to generate the data and statistical methods replace experimental controls in testing these restrictions and here is the difficulty in economics particularly macroeconomics the theory used to derive tests ordinarily does not generate a complete specification of which variables are to be held constant when statistical tests are performed on the relation between the dependent variable and the independent variables of primary interest accordingly in such cases there will be a set of often very different candidate regression based tests each of which has equal status with the others since each is based on a different projection of the same underlying multivariate model except in the unlikely event that the explanatory variables are mutually orthogonal the conditional regression coefficients which generally form the basis for the test statistic will depend on the conditioning set we conclude from this that if a theory which does not generate a complete specification of the regression test is nonetheless to have testable implications these implications must be robust over the permissible alternative specifications if the restrictions indicated by the theory are satisfied in some projections but not in others that have an equal claim to represent implications of the theory one cannot conclude that the theory has been confirmed the fact that the observable implications of valid theories must obtain over a broad but usually incompletely specified set of regressions rather than for a single regression introduces a large and unavoidable element of imprecision into hypothesis testing in macroeconomics generally it appears to be appropriate to weaken the statistical criterion for rejecting theories consider for example the theory of money demand which will engage our attention in this paper the tobin baumol square root formula implies that the elasticity of money demand with respect to the interest rate is exactly one half but which interest rate should wealth be held constant inflation in view of such uncertainties it would be inappropriate to insist in a literal minded fashion on rejecting the tobin baumol model if in some regression the measured interest elasticity differed from one half by more than two standard deviations and only then obviously a more flexible approach is called for the practice has been to conclude that the statistical evidence is consistent with the tobin baumol model as long as the interest rate coefficient is negative if it is negative and significant or negative and insignificantly different from minus one half that would provide somewhat stronger confirmation but a positive coefficient particularly a significantly positive coefficient would be viewed as raising questions about the validity of the theory in macroeconomics generally as in the money demand application the typical response to specification uncertainty has been to regard a theory as supported if the signs of the estimated coefficients agree with those expected from theory and as disconfirmed otherwise there is no theoretical justification for this procedure but it seems to be a reasonable course to follow the point that economic theory ordinarily generates incompletely specified statistical university of california santa barbara we have received helpful comments from andrew abel robert clower michael darby robert engle stephen goldfeld david laidler edward leamer robert lucas frederic mishkin and edward prescott thomas hall provided able research assistance

spending time versus spending money we find systematic differences in the way that people spend time versus money ex post people are able to more easily accommodate negative outcomes by adjusting the value of their temporal inputs ex ante people are willing to spend more time for higher risk higher return options whereas when spending money the pattern is reversed and the more standard pattern of increasing risk aversion is observed although accurate assessment of the opportunity costs of time is key to making good decisions ambiguity in the value of time promotes accommodation and rationalization

please or squeeze brand performance implications of constrained and unconstrained multi item promotions existing research on price promotions typically investigates the effects of single product promotions however brand managers often promote multiple items simultaneously to bolster the performance of a complete brand line this paper investigates the brand performance implications of such multi item promotions we distinguish between two types of multi item promotions traditional unconstrained multi item promotions that grant a discount irrespective of the size or composition of the purchase set and constrained multi item promotions that require consumers to purchase specific quantities self bundling or even predetermined combinations fixed bundling of promoted items using a normative consumer decision model the authors analyze the relative effectiveness of these promotions in terms of unit sales and revenue impact and show that promotion performance is moderated by consumers preference for variety the authors find that unconstrained multi item promotions outperform single item promotions especially in markets without variety seeking in markets with variety seeking unconstrained multi item promotions are not as effective in stealing extra sales from competition because consumers prefer to spread their purchases across all items including competitive ones however in those markets self bundling promotions are particularly effective because they force consumers to adopt larger amounts of the promoted items at the expense of competitors finally in neither type of market does fixed bundling substantially improve promotion performance

the bottom dollar effect the influence of spending to zero on pain of payment and satisfaction spending that exhausts a budget is shown to decrease satisfaction with purchased products relative to spending when resources remain in the budget six studies including those in which participants earn and spend real resources and evaluate real products explore this bottom dollar effect this research contributes to prior mental accounting research regarding how costs influence decision making e g bundling coupling sunk costs and to the satisfaction literature supporting the role of pain of payment in this process we show that the bottom dollar effect increases as effort required to earn budgetary resources increases decreases in the presence of windfall gains and decreases when there is less time between budget exhaustion and replenishment mediation analyses further demonstrate the role of payment pain in the bottom dollar effect implications are discussed in the context of behavioral research marketing promotions management and public policy

cross section estimation of us demand for alcoholic beverage a flexible limited dependent variable model is used to examine us demand for alcoholic beverage parameterization and distributional assumptions of the double hurdle model cragg 1971 and tobit model tobin 1958 are rejected findings suggest that price income household composition and other characteristics have significant effects on alcohol consumption income and own price elasticities are significant but relatively small

how construals of money versus time impact consumer charitable giving while past research has suggested that consumers have fundamentally different responses to thinking about money versus time the current work clarifies an important nuance in terms of how consumers construe these two resources we demonstrate that in the domain of charitable giving money is construed relatively more concretely whereas time is construed relatively more abstractly this difference in the construal of these two resources has implications for how appeals for charitable contributions or money versus time should be framed when the construal level at which the consumer considers the cause is aligned misaligned with the construal level of the resource being requested contribution intentions and behaviors increase decrease in addition the moderating role of resource abundance is examined in particular when money is considered abundant vs nonabundant consumers no longer exhibit more concrete thoughts in response to money compared to time finally when the donation request makes consumers think of money in a more abundant manner monetary donations can be successfully motivated with a more abstract call for charitable support the theoretical and practical implications for marketers and charitable organizations are discussed

the probability distribution of future demand the case of hydro quebec the bootstrapping technique of efron 1979 is used to estimate the probability distribution of future electricity demand for hydro quebec the application follows the regression approach of freedman and peters 1984a b but also allows for serially correlated disturbances and uncertainty in the independent variable forecasts

congestion based lead time quotation for heterogenous customers with convex concave delay costs optimality of a cost balancing policy based on convex hull functions we consider a congestible system serving multiple classes of customers who differ in their delay sensitivity and valuation of service or product customers are endowed with convex concave delay cost functions a system manager offers a menu of lead times and corresponding prices to arriving customers who then choose the lead time price pair that maximizes their net utility value minus disutility of delay and price we investigate how such menus should be chosen dynamically depending on the system backlog to maximize welfare we formulate a novel fluid model of the problem and show that the cost balancing policy based on the convex hulls of the delay cost functions is socially optimal if the system manager can tell customer types apart if types are indistinguishable to the system manager the cost balancing policy is also incentive compatible under social optimization finally we show through a simulation study that the cost balancing policy does well in the context of the original stochastic problem by testing it against various natural benchmarks

addiction and cue triggered decision processes we propose a model of addiction based on three premises 1 use among addicts is frequently a mistake 2 experience sensitizes an individual to environmental cues that trigger mistaken usage 3 addicts understand and manage their susceptibilities we argue that these premises find support in evidence from psychology neuroscience and clinical practice the model is tractable and generates a plausible mapping between behavior and the characteristics of the user substance and environment it accounts for a number of important patterns associated with addiction gives rise to a clear welfare standard and has novel implications for policy

a theory of rational addiction we develop a theory of rational addiction in which rationality means a consistent plan to maximize utility over time strong addiction to a good requires a big effect of past consumption of the good on current consumption such powerful complementarities cause some steady states to be unstable they are an important part of our analysis because even small deviations from the consumption at an unstable steady state can lead to large cumulative rises over time in addictive consumption or to rapid falls in consumption to abstention our theory also implies that cold turkey is used to end strong addictions that addicts often go on binges that addicts respond more to permanent than to temporary changes in prices of addictive goods and that anxiety and tensions can precipitate an addiction

measuring self control problems we develop a survey instrument to measure self control problems in a sample of highly educated adults this measure relates in the manner that theory predicts to liquid wealth accumulation and personality measures yet while self control problems are typically seen as resulting in overconsumption and low wealth we identify a significant group who underconsume and thereby accumulate high levels of wealth in addition self control problems are smaller in scale for older than for younger respondents those who put money aside in retirement accounts may be delaying access to a point at which self control problems are no longer important jel d12 d14

allocating discretionary time complementarity among activities analysis of complementarity among 50 discretionary activities suggests 1 the greater meaning of partial versus simple correlational measures 2 the validity of seven a priori sets of complements 3 the usefulness of multidimensionally scaled correlations in identifying two key activity dimensions intellectual effort and physical exertion and 4 implications for both marketing and public policy

tracking costs of time and money how accounting periods affect mental accounting after people incur costs to get future benefits they usually track these costs in their mental accounts and are keen to receive the benefits when they become available we introduce the notion that costs and benefits can occur either in the same accounting period day season etc or in different periods our key argument is that monetary costs are tracked across accounting periods but that temporal costs are written off at the end of the period in which they are incurred thus accounting periods lead to a time money asymmetry in the tracking of costs and consequently in the likelihood of seeking benefits in a laboratory study an online panel study and a field study with movie theater patrons we demonstrate how this relationship among accounting periods cost tracking and benefit seeking is different for time than for money our findings offer insights into the sunk cost effect time money differences and mental accounting

choice and procrastination author s o donoghue ted rabin matthew abstract recent models of procrastination due to self control problems assume that a procrastinator considers just one option and is unaware of her self control problems we develop a model where a person chooses from a menu of options and is partially aware of her self control problems this menu model replicates earlier results and generates new ones a person might forego completing an attractive option because she plans to complete a more attractive but never to be completed option hence providing a non procrastinator additional options can induce procrastination and a person may procrastinate worse pursuing important goals than unimportant ones

sensitivity analyses of the deterrence hypothesis let s keep the econ in econometrics abstract leamer and mcmanus applied extreme bound analysis eba in an empirical study of the deterrent effects of capital punishment and other penalties their analysis has questioned the validity of the deterrence hypothesis the thrust of our paper is twofold first by applying eba to well known econometric models of demand production and human capital investment our analysis exposes and illustrates the inherent flaws of eba as a method of deriving valid inferences about model specification second since the analysis shows leamer and mcmanus s inferences about deterrence to be based on a flawed methodology we offer an alternative theory based sensitivity analysis of estimated deterrent effects using similar data our analysis supports the deterrence hypothesis more generally it emphasizes the indispensable role of theory in guiding sensitivity analyses of model specification

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

squeezed coping with constraint through efficiency and prioritization when consumers perceive that a resource is limited and may be insufficient to accomplish goals they recruit and enact plans to cope with the shortage we distinguish two common strategies efficiency planning yields savings by stretching the resource whereas priority planning does so by sacrificing less important goals using a variety of methods to explore both financial and time planning we investigate how the two types of planning differ how they vary with constraint and how they interrelate relative to efficiency planning priority planning is perceived as yielding larger one time savings but it feels more costly because it requires trade offs within resource e g money for money as opposed to cross resource e g time for money as constraint increases and greater resource savings are required prioritization becomes more likely however the shift to prioritization is often insufficient and consumers tend to react to insufficient prioritization dysfunctionally making a bad situation worse budgeting helps consumers behave more adaptively budgeters respond to constraint with more priority planning than nonbudgeters and they report fewer dysfunctional behaviors like overspending and impulsive shopping

adaptive behavior of impatient customers in tele queues theory and empirical support we address the modeling and analysis of abandonments from a queue that is invisible to its occupants such queues arise in remote service systems notably the internet and telephone call centers hence we refer to them as tele queues a basic premise of this paper is that customers adapt their patience modeled by an abandonment time distribution to their service expectations in particular to their anticipated waiting time we present empirical support for that hypothesis and propose an m m m based model that incorporates adaptive customer behavior in our model customer patience depends on the mean waiting time in the queue we characterize the resulting system equilibrium namely the operating point in steady state and establish its existence and uniqueness when changes in customer patience are bounded by the corresponding changes in their anticipated waiting time the feasibility of multiple system equilibria is illustrated when this condition is violated finally a dynamic learning model is proposed where customer expectations regarding their waiting time are formed through accumulated experience we demonstrate via simulation convergence to the theoretically anticipated equilibrium while addressing certain issues related to censored sampling that arise because of abandonments

waiting time and decision making is time like money time is a resource as such consumers have to make decisions regarding their use of time in the purchase and consumption of goods and services using prospect theory and mental accounting as theoretical frameworks this article investigates whether consumers treat time like money when they make decisions in a series of studies we found that the value of consumers time is not constant but depends on contextual characteristics of the decision situation our results also suggest that in deterministic situations people make decisions involving time losses in a manner consistent with the convex loss function proposed by prospect theory however in decision making under conditions of risk people seem to make risk averse choices with respect to decisions in the domain of time in contrast to the risk seeking behavior often found with respect to decisions involving losses of money we discuss the nonfungibility of time as an explanation for the discrepancy between decisions involving time and those involving money

sunk costs and travel cancellation focusing on temporal cost abstract tourism products differ from ordinary retail products in terms of the spatial and temporal separation between the purchase and experiencing the product despite its importance temporal separation has not drawn much attention in tourism research the main objective of this study is to understand the effects of temporal sunk costs on potential travelers cancellation intentions in addition to monetary sunk costs the results of this study suggested the possibility that temporal costs can be converted into monetary costs but the conversion relationship may not be linear this study also indicated that travelers intentions to cancel a travel product decreased as the temporal and monetary sunk costs increased further prior experience moderated the relationship when temporal sunk costs were involved suggesting that repeat visitors intentions to cancel their reservations are more influenced by temporal sunk costs than first time visitors further discussion and implications are provided in the main body of this paper

psychological characteristics and household savings behavior the importance of accounting for latent heterogeneity abstract we employ a finite mixture model with maximum likelihood ml estimation to analyze latent heterogeneity in the relationship between psychological characteristics and household savings behavior in a one step ml estimation approach we estimate a class membership model and a behavioral model of the classes jointly adopting this approach enables us to simultaneously assess how socio demographic characteristics affect class membership probabilities and estimate class specific regression coefficients to test whether psychological characteristics predict savings behavior differently across latent classes we apply this approach to a representative sample of uk households n 3382 and identify two different latent classes striving versus established households we find that the relationship between psychological characteristics and savings behavior differs across these two classes demonstrating the importance of accounting for latent heterogeneity when studying the drivers of savings behavior our results have implications for policymakers attempting to improve household savings behavior

the ant and the grasshopper understanding personal saving orientation of consumers a low savings rate is a persistent social issue with significant present and future ramifications as an alternative to conceptualizing saving money as goal directed behavior the present research examines the chronic tendencies of people to save money in a consistent and sustained manner through a personal saving orientation pso drawing upon theorizing on action control and research on forming and maintaining habits the pso emphasizes consistent sustainable saving activities and incorporating them into one s lifestyle in a set of nine studies the pso scale is developed and its nomological test retest discriminant and predictive validities are established the results also show that the pso moderates the relationship between consumers financial knowledge and their accumulated savings additionally low pso consumers are responsive to an intervention to help them save money the pso offers an effective method for understanding differences between consumers in their financial decision making and behaviors and it can be used as a guide to encourage consistent and sustained saving practices

optimal pricing and composition of multiple bundles a two step approach abstract this paper analyzes the problem facing a firm that must determine the optimal composition and pricing of multiple bundles it supplies to a single market segment it is assumed the firm s competitors does not react in the short run to its decisions and that their bundles prices and characteristics are known it is further assumed that potential consumers of bundles are rational and maximize a random utility function the problem is modeled as a mixed integer non linear program though such programs are normally hard to solve using traditional methods the difficulties are circumvented here by taking advantage of the problem s mathematical structure to develop a novel two phase solution approach two aspects of the solution are particularly worthy of note 1 we demonstrate that the optimal price of a bundle marketed by a firm depends on the composition of all the firm s bundles and not on their prices and on the composition and price of all the competitors bundles in the market and 2 that if the consumer choice behavior is described by a logit model then the firm s bundles should be very similar to each other

expense neglect in forecasting personal finances abstractthis article examines how consumers forecast their future spare money or financial slack although consumers generally think that both their income and expenses will rise in the future they underweight the extent to which their expected expenses will cut into their spare money a phenomenon the authors term expense neglect the authors test and rule out several possible explanations for this phenomenon and conclude that expense neglect is due in part to insufficient attention toward expectations about future expenses relative to future income tightwad consumers who are chronically attuned to costs show less severe expense neglect than spendthrifts who are less attuned to costs the authors further find that expectations regarding changes in income and not changes in expenses predict responses to the michigan index of consumer sentiment a leading macroeconomic indicator finally the authors conduct a meta analysis of their entire file drawer 27 studies 8 418 participants and fi

simple solutions to the initial conditions problem in dynamic nonlinear panel data models with unobserved heterogeneity i study a simple widely applicable approach to handling the initial conditions problem in dynamic nonlinear unobserved effects models rather than attempting to obtain the joint distribution of all outcomes of the endogenous variables i propose finding the distribution conditional on the initial value and the observed history of strictly exogenous explanatory variables the approach is flexible and results in simple estimation strategies for at least three leading dynamic nonlinear models probit tobit and poisson regression i treat the general problem of estimating average partial effects and show that simple estimators exist for important special cases copyright 2005 john wiley sons ltd

decision making under uncertainty capturing dynamic brand choice processes in turbulent consumer goods markets we construct two models of the behavior of consumers in an environment where there is uncertainty about brand attributes in our models both usage experience and advertising exposure give consumers noisy signals about brand attributes consumers use these signals to update their expectations of brand attributes in a bayesian manner the two models are 1 a dynamic model with immediate utility maximization and 2 a dynamic forward looking model in which consumers maximize the expected present value of utility over a planning horizon given this theoretical framework we derive from the bayesian learning framework how brand choice probabilities depend on past usage experience and advertising exposures we then form likelihood functions for the models and estimate them on nielsen scanner data for detergent we find that the functional forms for experience and advertising effects that we derive from the bayesian learning framework fit the data very well relative to flexible ad hoc functional forms such as exponential smoothing and also perform better at out of sample prediction another finding is that in the context of consumer learning of product attributes although the forward looking model fits the data statistically better at conventional significance levels both models produce similar parameter estimates and policy implications our estimates indicate that consumers are risk averse with respect to variation in brand attributes which discourages them from buying unfamiliar brands using the estimated behavioral models we perform various scenario evaluations to find how changes in marketing strategy affect brand choice both in the short and long run a key finding obtained from the policy experiments is that advertising intensity has only weak short run effects but a strong cumulative effect in the long run the substantive content of the paper is potentially of interest to academics in marketing economics and decision sciences as well as product managers marketing research managers and analysts interested in studying the effectiveness of marketing mix strategies our paper will be of particular interest to those interested in the long run effects of advertising note that our estimation strategy requires us to specify explicit behavioral models of consumer choice behavior derive the implied relationships among choice probabilities past purchases and marketing mix variables and then estimate the behavioral parameters of each model such an estimation strategy is referred to as structural estimation and econometric models that are based explicitly on the consumer s maximization problem and whose parameters are parameters of the consumers utility functions or of their constraints are referred to as structural models a key benefit of the structural approach is its potential usefulness for policy evaluation the parameters of structural models are invariant to policy that is they do not change due to a change in the policy in contrast the parameters of reduced form brand choice models are in general functions of marketing strategy variables e g consumer response to price may depend on pricing policy as a result the predictions of reduced form models for the outcomes of policy experiments may be unreliable because in making the prediction one must assume that the model parameters are unaffected by the policy change since the agents in our models choose among many alternative brands their choice probabilities take the form of higher order integrals we employ monte carlo methods to approximate these integrals and estimate our models using simulated maximum likelihood estimation of the dynamic forward looking model also requires that a dynamic programming problem be solved in order to form the likelihood function for this we use a new approximation method based on simulation and interpolation techniques these estimation techniques may be of interest to researchers and policy makers in many fields where dynamic choice among discrete alternatives is important such as marketing decision sciences labor and health economics and industrial organization

translated attributes as choice architecture aligning objectives and choices through decision signposts every attribute can be expressed in multiple ways for example car fuel economy can be expressed as fuel efficiency miles per gallon fuel cost in dollars or tons of greenhouse gases emitted each expression or translation highlights a different aspect of the same attribute we describe a new mechanism whereby translated attributes can serve as decision signposts because they 1 activate otherwise dormant objectives such as proenvironmental values and goals and 2 direct the person toward the option that best achieves the activated objective across three experiments we provide evidence for the occurrence of such signpost effects as well as the underlying psychological mechanism we demonstrate that expressing an attribute such as fuel economy in terms of multiple translations can increase preference for the option that is better aligned with objectives congruent with this attribute e g the more fuel efficient car for those with proenvironmental attitudes even when the new informatio

the time vs money effect shifting product attitudes and decisions through personal connection the results of five field and laboratory experiments reveal a time versus money effect whereby activating time vs money leads to a favorable shift in product attitudes and decisions because time increases focus on product experience activating time vs money augments one s personal connection with the product thereby boosting attitudes and decisions however because money increases the focus on product possession the reverse effect can occur in cases where merely owning the product reflects the self i e for prestige possessions or for highly materialistic consumers the time versus money effect proves robust across implicit and explicit methods of construct activation

a generalizable scale of propensity to plan the long and the short of planning for time and for money planning has pronounced effects on consumer behavior and intertemporal choice we develop a six item scale measuring individual differences in propensity to plan that can be adapted to different domains and used to compare planning across domains and time horizons adaptations tailored to planning time and money in the short run and long run each show strong evidence of reliability and validity we find that propensity to plan is moderately domain specific scale measures and actual planning measures show that for time people plan much more for the short run than the long run for money short and long run planning differ less time and money adaptations of our scale exhibit sharp differences in nomological correlates short run and long run adaptations differ less domain specific adaptations predict frequency of actual planning in their respective domains a very long run money adaptation predicts fico credit scores low planners thus face materially higher cost of credit

the budget contraction effect how contracting budgets lead to less varied choice how do consumers adjust their spending when their budget changes a common view is that the allocation of one s current budget should not depend on previous budget allocations contrary to this the authors find that when the budget contracts to a particular level consumers select less variety as measured by the number of different items with some of the budget allocated to them than when their budget expands to that same level this budget contraction effect stems from a reduction in variety under the contracting budget not from variety expansion under the expanding budget evidence from five experiments indicates that the effect is driven by a desire to avoid feelings of loss associated with spreading allocation cuts relative to reference quantities from previous allocations across many items

wealth accumulation and the propensity to plan why do similar households end up with very different levels of wealth we show that differences in the attitudes and skills with which they approach e nancial planning are a signie cant factor we use new and unique survey data to assess these differences and to measure each household s propensity to plan we show that those with a higher such propensity spend more time developing e nancial plans and that this shift in planning is associated with increased wealth these e ndings are consistent with broad psychological evidence concerning the benee cial impacts of planning on goal pursuit those with a high propensity to plan may be better able to control their spending and thereby achieve their goal of wealth accumulation we e nd direct evidence supporting this effortful self control channel in the very strong relationship we uncover between the propensity to plan and budgeting behavior

contests with money and time experimental evidence on overbidding in all pay auctions competition for a prize frequently takes the form of dedicating time toward winning a contest those who spend more time become more likely to obtain the prize we model this competition as an all pay auction under incomplete information and report an experiment in which expenditures and rewards are in terms of time in the experiment subjects must stay in the laboratory doing nothing for an initially prespecified length of time however they can bid in terms of time to leave early the auction has an all pay structure so that if an individual does not submit the highest bid within her group she must stay for the additional time that she bid we correlate behavior in this game with behavior in an isomorphic all pay auction played with money bids we also consider how two measures of sophistication the cognitive reflection test crt score and performance on a probability calibration task correlate with behavior we find strong similarities in overall behavior between the auctions conducted with money and with time bidding greater than equilibrium levels is typical and as a consequence average earnings are negative in both auctions thus the result that there is overdissipation of rent in all pay auctions extends to competition in terms of time

savings and prize linked savings accounts abstract many households have insufficient savings to handle moderate and routine consumption shocks many of these financially fragile households also have the highest lottery expenditures as a proportion of income this combination suggests that prize linked savings pls accounts combining security of principal with lottery type jackpots can increase savings among these at risk households results from an online experiment show that the introduction of pls accounts increase total savings and reduce lottery expenditures significantly especially among individuals with the lowest levels of savings and income the results imply that pls accounts offer a plausible market based solution to encourage individuals to increase savings

an integrated product planning model for pricing and bundle selection using markov decision processes and data envelope analysis abstract when bundling products during the product planning stage there are a number of possible combinations that can be offered to customers consider a firm that offers n distinctive products then there are 2 n n 1 possible bundling combinations now if we wish to make pricing and bundle selection decisions keeping in my mind limited inventory and a finite time horizon then the size of the state space could be very large and finding an optimal solution could be impossible to tackle this issue we formulate an integrated model that utilizes a markov decision process and data envelope analysis bundle selections are made using data envelope analysis in each decision epoch once the efficient bundles are selected they are priced by solving a markov decision process using dynamic programming numerical examples are solved to exhibit the model s potential in solving real world problems

from the econometrics of capital punishment to the capital punishment of econometrics on the use and abuse of sensitivity analysis the academic debate over the deterrent effect of capital punishment has intensified again with a major policy outcome at stake about two dozen empirical studies have recently emerged that explore the issue donohue and wolfers 2005 claim to have examined the recent studies and shown the evidence not to be robust to specification changes we argue that the narrow scope of their study does not warrant this claim moreover focusing on our two studies that they have examined we show the deterrence findings to be robust while their work has serious flaws and their reporting appears to be selective the selectivity is biased towards showing no deterrence