assessing demand artifacts in consumer research an alternative perspective in a recent insightful article on demand artifacts in consumer research t a shimp e m hyatt and d j snyder using a 1989 article by j j kellaris and a d cox as backdrop provided an appraisal of demand artifacts in this article we critically evaluate some of the assumptions and conclusions of shimp et al s analysis of the extent to which demand artifacts might explain the 1982 results of g j gorn as analyzed by kellaris and cox in addition we offer some useful suggestions for minimizing demand problems

leader driven primacy using attribute order to affect consumer choice leader driven primacy uses initial product information to install a targeted brand as the early leader in a choice between two brands biased evaluation of subsequent attributes builds support for the targeted brand causing the choice itself to be biased study 1 finds evidence of this effect in choices between two equally attractive brands study 2 extends the finding to a situation where one brand is inferior and to conditions where participants do not explicitly identify their leader study 3 shows how leader driven primacy can be reduced by encouraging brand based processing

a critique of darley and lim s alternative perspective this reply challenges w k darley and j s lim s conclusions that an earlier article of ours misleads consumer researchers about the role and treatment of demand artifacts and that our analysis regarding g j gorn s experiments are flawed we also question darley and lim s proposals for minimizing demand artifacts

goal reversion in consumer choice how do consumers manage goal conflicts before making a choice this question was studied by examining emerging preferences in choices involving two products that were means to conflicting goals these preference patterns revealed that an initially active goal which had been set aside to reconcile a goal conflict exerted greater than expected influence on the remainder of the choice process this influence was manifest in a tendency for consumers to revert to the product aligned with the initially active goal upon seeing information that objectively favored neither product the prevalence of the reversion i e flip flop preference pattern suggests that activation of a set aside goal escalates when it is set aside much as if its pursuit had been impeded by an external force in addition to revealing goal reversion in a variety of choice contexts the studies in this article also find that goal reversion is moderated by goal conflict

what to say when influencing consumer choice by delaying the presentation of favorable information delaying the presentation of some favorable information about an alternative e g a product service brand store or cause until after consumers have completed their pre choice screening can increase that alternative s choice share while such a delay reduces the alternative s chance of surviving the screening it can actually increase its probability of ultimately being chosen evidence from five experiments demonstrates this preference enhancing effect of the delayed presentation of favorable information and it illustrates the underlying preference dynamics across decision stages associated with such a delay the findings also indicate that this preference enhancing effect is driven by a combination of two mental mechanisms a shift in the decision weights of attribute dimensions rendering dimensions on which a delay occurs more influential across all alternatives and an overall preference boost for the alternative about which information is delayed

are sale signs less effective when more products have them we analyze data from a variety of sources including historical data from a women s clothing catalog a field study in that catalog survey responses to catalog stimuli and grocery store data for frozen juice toothpaste and tuna the analysis yields three conclusions first sale signs are less effective at increasing demand when more items have them second total category sales are maximized when some but not all products have sale signs third placing a sale sign on a product reduces the perceived likelihood that the product will be available at a lower price in the future but the effect is smaller when more products have sale signs by ruling out alternative hypotheses the findings suggest that moderation of the sale sign effect is in part due to reduced credibility when they are used on more products the credibility argument is motivated in part by a recent paper that presented an equilibrium model predicting that customers who lack knowledge of market prices rely on point of purchase sale signs to help evaluate posted prices anderson and simester 1998 the model predicts that sale signs increase demand but that the increase is smaller when more products have them this moderating effect regulates how many sale signs stores use and makes customer reliance on these cues an equilibrium strategy to evaluate whether the number of sale signs moderates their effectiveness we compare demand for items with sale signs when varying the number of sale signs on other products for this comparison we use two datasets describing demand for products in a women s clothing catalog the first dataset describes customer orders for the same set of items across three sequential issues of the catalog the second dataset is a field test conducted by mailing different versions of the catalog to randomly selected customer samples reassuringly although the datasets do not share the same limitations the findings are consistent and indicate that sale signs are less effective when more products have them in addition to the credibility explanation there are at least two alternative explanations for this result first using a sale sign to make a product more attractive may lead to substitution of demand from other sale items within a store and so demand may vary even if there is no change in the credibility of the sale signs to discriminate between the substitution and credibility explanations we evaluate whether total category demand is maximized when some but not all products in the category have sale signs the credibility explanation implies that adding another sale sign will eventually decrease total category sales when many items already have sale signs in contrast if adding a sale sign to an item leads solely to substitution from other products within or outside the category we will not observe a decrease in total category demand we test the total category sales prediction using grocery store scan data describing total category demand for frozen juice toothpaste and canned tuna the findings reveal that in all three categories there is a significant reduction in aggregate demand a second alternative explanation is that sale signs focus customer attention on products with these cues distinguishing between the attention and credibility explanations is a difficult task they both imply that sale signs deliver less information when there are too many sale signs the credibility argument predicts that this occurs because the signs are noticed but not believed the attention explanation predicts that the signs are less likely to be noticed when attention is diluted by a large number of sale signs to discriminate between the credibility explanation and this attention effect we use survey measures to evaluate a third hypothesis this hypothesis predicts both that placing a sale sign on a product reduces the perceived likelihood that the product will be available at a lower price in the next period and that this effect is smaller when more items have them in an attempt to control for the attention effect we focus subjects attention on a set of focal items under these conditions it is unlikely that subjects overlook sale signs on these items more important the likelihood of overlooking sale signs on the focal items is unlikely to depend on how many other items also have sale signs the results confirm both that the presence of a sale sign reduced subjects expectations that an item would be available at a lower price in the future and that this effect is smaller when more items have sale signs

inherent rule variability in consumer choice changing rules for change s sake the present research demonstrates that consumers tend to vary their use of decision rules independent of option and set characteristics in five experiments increased choice of a particular option e g lower price brand name or compromise option was associated with relatively decreased choice of that same generic option on occasions that followed results indicate that this inherent rule variability is not an effect of background contrast but instead relates to consumers favorable valuation of decision change itself this research implies that the idea of contingent decision making applies not only to decision outcomes but also to decision processes

economic implications of using a mean var model for portfolio selection a comparison with mean variance analysis abstract we relate value at risk var to mean variance analysis and examine the economic implications of using a mean var model for portfolio selection when comparing two mean variance efficient portfolios the higher variance portfolio might have less var consequently an efficient portfolio that globally minimizes var may not exist surprisingly we show that it is plausible for certain risk averse agents to end up selecting portfolios with larger standard deviations if they switch from using variance to var as a measure of risk therefore regulators should be aware that var is not an unqualified improvement over variance as a measure of risk

consumer learning in a turbulent market environment modeling consumer choice dynamics after a product harm crisis abstract the authors empirically study consumer choice behavior in the wake of a product harm crisis which creates consumer uncertainty about product quality they develop a model that explicitly incorporates the impact of such uncertainty on consumer behavior assuming that consumers are uncertain about the mean product quality level and learn about product quality through the signals contained in use experience and the product harm crisis and also that consumers are uncertain about the precision of the signals in conveying product quality and update their perception of this precision over time they estimate this model using a scanner panel data set that includes consumer purchase history before during and after a product harm crisis that affected kraft foods australia s peanut butter division in june 1996 the proposed model fits the data better than the standard consumer learning model which assumes consumers are uncertain about product quality level but the precision of information in conveying p

are private markets and filtering a viable source of low income housing estimates from a repeat income model while filtering has long been considered the primary mechanism by which markets supply low income housing direct estimates of that process have been absent this has contributed to doubts about the viability of markets and to misplaced policy i fill this gap by estimating a repeat income model using 1985 2011 panel data real annual filtering rates are faster for rental housing 2 5 percent than owner occupied 0 5 percent vary inversely with the income elasticity of demand and house price inflation and are sensitive to tenure transitions as homes age for most locations filtering is robust which lends support for housing voucher programs jel r21 r31 r38

the optimal portfolio problem with coherent risk measure constraints one of the basic problems of applied finance is the optimal selection of stocks with the aim of maximizing future returns and constraining risks by an appropriate measure here the problem is formulated by finding the portfolio that maximizes the expected return with risks constrained by the worst conditional expectation this model is a straightforward extension of the classic markovitz mean variance approach where the original risk measure variance is replaced by the worst conditional expectation the worst conditional expectation with a threshold a of a risk x in brief wcea x is a function that belongs to the class of coherent risk measures these are measures that satisfy a set of properties such as subadditivity and monotonicity that are introduced to prevent some of the drawbacks that affect some other common measures this paper shows that the optimal portfolio selection problem can be formulated as a linear programming instance but with an exponential number of constraints it can be solved efficiently by an appropriate generation constraint subroutine so that only a small number of inequalities are actually needed this method is applied to the optimal selection of stocks in the italian financial market and some computational results suggest that the optimal portfolios are better than the market index 2003 elsevier b v all rights reserved

do low income housing subsidies increase the occupied housing stock abstract a necessary condition for justifying a policy such as subsidized low income housing either via tenant based rental assistance or construction of public or private projects is that it has a real effect on market outcomes in this paper we examine one aspect of the real effect of subsidized housing does it increase the housing stock if subsidized housing raises the quantity of occupied housing per capita either more people are finding housing or they are being housed less densely on the other hand if subsidized housing merely crowds out equivalent quality low income housing that otherwise would have been provided by the private sector the housing policy may have little real effect on housing consumption using both census place and msa level data from the decennial census and from the department of housing and urban development we ask whether housing markets with more subsidized housing also have more total housing after accounting for housing demand we find that government financed units raise the total number of units in a market although on average one government subsidized unit adds only one third to one half of a unit to the total housing stock there is less crowd out in more populous markets and more crowd out in places where there is less excess demand for subsidized housing as measured by the number of government financed units per eligible person tenant based housing programs such as section 8 certificates and vouchers seem to be more effective than project based programs at targeting subsidized housing units to people who otherwise would not have their own

beyond expected utility subjective risk aversion and optimal portfolio choice under convex shortfall risk measures abstract we conduct a decision theoretic analysis of convex shortfall risk measures regarding their flexibility to represent subjective risk aversion and discuss the implications for the choice of optimal portfolios as convex shortfall risk measures are closely related to the expected utility functional we draw upon the expected utility framework as our benchmark first we show that unlike expected utility convex shortfall risk measures do always represent constant absolute risk aversion this constitutes a significant limitation when changing initial wealth of e g investors is relevant interestingly though it is exactly this limitation that provides additional degrees of freedom in representing subjective risk aversion beyond expected utility when initial wealth is fixed as e g in returned based portfolio selection models in the tradition of markowitz 1952 second we apply convex shortfall risk measures to the standard portfolio problem between a riskless and a risky asset we provide a procedure that allows inferring the optimal portfolios under convex shortfall risk measures from certain optimal expected utility portfolios the procedure incorporates the additional degrees of freedom in modeling subjective risk aversion and thus allows more flexible and realistic portfolios compared to expected utility third we address the optimal portfolio choice between a riskless and a risky asset in the presence of an additional background risk again we prove a correspondence result between optimal portfolios under convex shortfall risk measures and expected utility and obtain more flexible and realistic portfolios compared to expected utility we also compare the optimal risky investments without and with background risk and provide a necessary and sufficient condition for a reduction of the risky investment

long term earnings and employment effects of housing voucher receipt abstract using a propensity score matching approach coupled with difference in differences regression analysis we estimate the effect of housing voucher receipt on the employment and earnings of a large longitudinal sample of low income families for 6 years following voucher receipt our results indicate that voucher receipt has little effect on employment but a negative effect on earnings the negative earnings effect is largest in the years immediately following initial receipt and fades out over time in addition we find that the pattern of recipient earnings responses to voucher receipt differs substantially across demographic subgroups several robustness tests are run to support the reliability of our findings we discuss the implications of our findings for research and policy

old homes externalities and poor neighborhoods a model of urban decline and renewal abstract this paper investigates urban decline and renewal in the united states using three panels that follow neighborhoods on a geographically consistent basis over extended periods of time findings indicate that change in neighborhood economic status is common averaging roughly 13 percent per decade roughly two thirds of neighborhoods studied in 1950 were of quite different economic status fifty years later panel unit root tests for 35 msas indicate that neighborhood economic status is a stationary process consistent with long running cycles of decline and renewal in philadelphia county a complete cycle appears to last up to 100 years aging housing stocks and redevelopment contribute to these patterns as do local externalities associated with social interactions lower income neighborhoods appear to be especially sensitive to the presence of individuals that provide social capital many of the factors that drive change at the local level have large and policy relevant effects

comparative statics under uncertainty the case of mean variance preferences we analyze the comparative statics of optimal decisions under uncertainty when preferences are represented by twomoment mean variance utility functions we relate our findings to concepts for risk attitudes that are familiar from the expected utility approach in the two parameter approach a number of plausible comparative static effects already emerges under the assumption of decreasing absolute risk aversion to determine comparative static effects of changes in background risks stronger concepts are needed risk vulnerability temperance and standardness imply appropriately transferred to the mean variance framework the plausible effect that risk taking will be reduced if background risks increase 2002 elsevier b v all rights reserved

unrealistically optimistic consumers a selective hypothesis testing account for optimism in predictions of future behavior we propose that when predicting future behavior consumers selectively but unwittingly test the hypothesis that they will behave ideally this selective hypothesis testing perspective on unrealistic optimism suggests that estimates of future behavior should be similar to those made by individuals who assume that conditions will be ideal moreover consumers who initially provide estimates assuming that conditions will be ideal should recognize that the world is not ideal and so should test a more realistic hypothesis in line with these predictions we find that ideal world estimates e g in an ideal world how often will you exercise next week do not differ from standard estimates e g how often will you exercise next week we also find that individuals who initially estimate their behavior in an ideal world subsequently make more realistic predictions

crowd out effects of place based subsidized rental housing new evidence from the lihtc program abstract since its inception in 1987 the low income housing tax credit lihtc program has ballooned into the largest ever source of subsidized construction of low income housing in the united states accounting for one third of all recent multi family rental construction this paper examines the crowd out effects of this increasingly important source of low moderate income housing to do so we analyze the impact of lihtc construction at three different levels of geography msa county and 10 mile radius circles this allows us to employ increasingly extensive geographic fixed effects that help to difference away unobserved factors political variables are also used as instruments to further facilitate identification in all of our models iv estimates yield substantially greater crowd out than ols confirming the endogenous attraction of lihtc development to areas ripe for new construction our most robust iv estimates indicate that nearly 100 of lihtc development is offset by a reduction in the number of newly built unsubsidized rental units although the confidence band around this point estimate allows for less dramatic assessments additional estimates suggest that lihtc development has a much more moderate impact on construction of owner occupied housing but these estimates are imprecise overall while lihtc development may well affect the location of low moderate income rental housing opportunities our estimates suggest that the impact of the program on the number of newly developed rental housing units appears to be small

the effect of price on preference consistency over time construal level theory indicates that consumers tend to prefer products high in desirability greater functionality for distant future decisions but switch their preferences toward products high in feasibility greater usage convenience for near future decisions the current research demonstrates that price information traditionally considered as a feasibility cue can increase consumers near future preference toward products with greater functionality despite their low convenience leading to preference consistency over time as the underlying mechanism price information increases the functionality importance for near future decisions due to consumers enhanced value seeking tendency when seeing price and their lay belief that greater functionality represents higher value further when consumers are led to believe that greater convenience represents higher value price and the value seeking tendency result in a greater preference toward easy to use products for the distant future and lead to preference consistency across time as well theoretical implications are discussed

tourist destination and experience choice a choice experimental analysis of decision sequence effects abstract while many studies have investigated travel motives and modelled holiday destination choices none have directly modelled choice of type of holiday experience and how these two choices interrelate this study tests whether early exposure to geographical destination or experience type information in a decision task influences consumers final choices when choosing a holiday the study compares two choice tasks that have the same instructions and attributes but differ with respect to which attribute is exposed first and is used to label the choice options the destination name or the experience type findings show that early exposure to either attribute enhances the importance of the attribute although the effect is less pronounced for experiences than for destinations the findings are explained using the psychological notions of leader primacy complacency and induced mindset the research conducted in australia shows that sequential effects can be very important in shaping tourism consumption choices and decision making

the influence of generic advertising on brand preferences more than a billion dollars is spent annually on generic advertisements that promote the consumption of commodity goods generic advertising is designed to increase primary demand or the size of the pie without affecting selective demand or the share of the pie we find evidence to the contrary generic advertising increases the consumer s sensitivity to changes in price and systematically alters brand preferences these effects of generic advertising can be attributed to the tendency of generic ads to change the relative importance of the attributes used to evaluate the brands the results have implications for the public policy issue of how to effectively implement generic advertising without differentially benefiting certain brands and the managerial issue of how to integrate generic and brand advertising in order to achieve product category and brand differentiation goals

some stronger measures of risk aversion in the small and the large with applications the arrow pratt measures of risk aversion for von neumann morgenstern utility functions have become workhorses for analyzing problems in the microeconomics of uncertainty they have been used to characterize the qualitative properties of demand in insurance and asset markets to examine the properties of risk taking in taxation models and to study the interaction between risk and life cycle savings problems to name just a few applications equally importantly they have generated the linear risk tolerance class of utility functions which has provided canonical examples in such diverse areas as portfolio theory and the theory of teams despite these successes there have been a number of areas for which the results have been weaker than hoped it is natural to use the risk aversion measures to compare the behavior of individuals in risky choice situations for example consider the individual portfolio choice problem in a two asset world with a riskless asset and a risky asset if individual a has a uniformly higher arrow pratt coefficient of risk aversion than individual b then b will always choose a portfolio combination with more wealth invested in the risky asset but suppose that both assets are risky now there is no obvious sense in which the more risk averse individual can be said to hold a less risky portfolio but it seems strange that such a simple alteration should destroy the analytics which support the basic intuition similarly consider the basic insurance problem if one individual a is more risk averse than another b in the arrow pratt sense it follows that a will pay a larger premium to insure against a random loss than will b typically though an individual evaluates partial rather than total insurance that is only some gambles can be insured against and others must be retained in this case even when the gambles which are retained are independent from those which are insured it is no longer true that the individual whose arrow pratt measure of risk aversion is higher will pay a larger insurance premium the situation is no better when we consider comparative statics exercises for a single individual decreasing absolute risk aversion in the sense of arrow and

entropic risk measures and their comparative statics in portfolio selection coherence vs convexity abstract we conduct a decision theoretic analysis of optimal portfolio choices and in particular their comparative statics under two types of entropic risk measures the coherent entropic risk measure cerm and the convex entropic risk measure erm starting with the portfolio selection between a risky and a risk free asset framework of arrow 1965 and pratt 1964 we find a restrictive all or nothing investment decision under the cerm while the erm yields diversification we then address a portfolio problem with two risky assets and provide comparative statics with respect to the investor s risk aversion framework of ross 1981 here both the cerm and the erm exhibit closely interrelated inconsistencies with respect to the interpretation of their risk parameters as a measure of risk aversion for any two investors with different risk parameters it may happen that the investor with the higher risk parameter invests more in the riskier one of the two assets finally we analyze the portfolio problem risky vs risk free in the presence of an independent background risk and analyze the effect of changes in this background risk framework of gollier and pratt 1996 again we find questionable predictions under the cerm the optimal risky investment is always increasing instead of decreasing when a background risk is introduced while under the erm it remains unaffected

a critical appraisal of demand artifacts in consumer research especially since the publication of sawyer s instructive article on the topic consumer researchers have been concerned that demand artifacts significantly compromise the validity and generalizability of experimental findings in this article we provide an overview of the issues surrounding the demand artifacts controversy evaluate the preconditions for demand artifacts and offer a critique of suppositions about the consequences and appropriate control of demand artifacts kellaris and cox s critique of gorn s well known classical conditioning experiments provides the backdrop for much of the discussion

monetary incentives and mood abstract researchers have long debated the methodological necessity of monetary incentives in experimental research the current work shows that financial incentives not only can fail to improve task performance but also can worsen it three studies verify that incentives can elevate mood and that this mood enhancement contributes to worsened task performance the authors discuss implications for the use of incentives in experimental research

coherent arbitrariness stable demand curves without stable preferences economic theories of valuation generally assume that prices of commodities and assets are derived from underlying fundamental values for example in finance theory asset prices are believed to reflect the market estimate of the discounted present value of the asset s payoff stream in labor theory the supply of labor is established by the tradeoff between the desire for consumption and the displeasure of work finally and most importantly for this chapter consumer microeconomics assumes that the demand curves for consumer products chocolates cds movies vacations drugs and so forth can be ultimately traced to the valuation of pleasures that consumers anticipate receiving from these products because it is difficult as a rule to measure fundamental values directly empirical tests of economic theory typically examine whether the effects of changes in circumstances on valuations are consistent with theoretical prediction for example whether labor supply responds appropriately to a change in the wage rate whether compensated demand curves for commodities are downward sloping or whether stock prices respond in the predicted way to share repurchases however such comparative static relationships are a necessary but not sufficient condition for fundamental valuation e g summers 1986 becker 1962 was perhaps the first to make this point explicitly when he observed that consumers choosing commodity bundles randomly from their budget set would nevertheless produce downward sloping demand curves

the market price of low income housing tax credits abstract the low income housing tax credit lihtc program awards a subsidy to private developers who construct and operate housing units with income targeted rent controls for at least 15 years the program allocated 6 6 billion to developers in 2006 and over 1 6 million units have been subsidized under the program since its inception in 1987 a historical literature suggests place based housing subsidies such as the lihtc program will be more expensive in providing the same level of housing support to the poor than tenant based strategies i e housing vouchers this paper uses an administrative data series of lihtc subsidized properties in california to show the program encourages developers to construct housing units that are an estimated 20 more expensive per square foot than average industry estimates it is additionally shown that due to liquidity constraints faced by lihtc primary developers in how the subsidy is allocated virtually all developers sell the tax credits at a substantial discount below their statutory value immediately after construction this price is estimated to be 0 73 per 1 of tax credit or 1 8 billion annually as compared to alternatively allocating a lump sum grant to developers