Knowledge that Transforms

Previously (see Novemsky and Kahneman 2005 ), the authors proposed that intentions to exchange versus to consume a good moderate loss aversion for that good. In this rejoinder, the authors follow up on this idea, discussing several mechanisms that Ariely, Huber, and Wertenbroch (2005) propose by which intentions can moderate loss aversion. The authors consider both emotional attachment to the good and cognitive focus during evaluation as potential mediators of the effects of intentions on loss aversion.

Because of their arm's-length relationship with patients, pharmaceutical manufacturers have been interested in whether drug advertising can improve therapy compliance. Contrary to many industry surveys, the author finds that the impact is small in economic terms, the effect spills over to other brands, and, in certain cases, the effect may decrease average compliance rates.

The authors develop a general parametric modeling framework for bidding behavior in Internet auctions. Toward this end, they incorporate four key components of the bidding process under their framework: whether people bid on an auction, (if so) who bids, when they bid, and how much they bid over the entire sequence of bids in an auction. This integrated framework is based on a single, latent, time-varying construct of consumer willingness to bid, which bidders have and update for a particular auction item over the course of the auction duration. Using a database of notebook auctions from one of the largest Internet auction sites in Korea, the authors demonstrate that this general (yet parsimonious) model captures the key behavioral aspects of bidding behavior. Furthermore, the authors provide a valuable tool for managers at auction sites to conduct their customer relationship management efforts, which require them to evaluate the ”goodness” of the listed auction items (whether people bid) and the goodness of the potential bidders (who bids, when they bid, and how much they bid).

The exclusion of firm-specific considerations in the standard (economizing calculus) approach to buyer–supplier ties makes the large variations in the types of contracts used within the same industry unexplainable. This article tests Ghosh and John's (1999) strategizing calculus model that purports to close this gap. The core organizing principle of this model is a three-way fit among firm resources, investments, and governance that yields the highest net receipts. From this principle, the authors derive predictions and test them using data from 193 original equipment manufacturers that engage independent component suppliers. The data show that investments must be aligned with more complete contract terms (e.g., fixed prices, “hard” designs) to yield cost reduction outcomes for all firms. However, investments must be aligned with more incomplete contracts (e.g., cost-plus prices, “soft” designs) to yield end-product enhancement outcomes, but only for firms with relatively small downstream market margins. Firms with larger downstream market margins find that the previous alignment reduces end-product enhancements. These results are robust to checks for common method bias and alternative estimation procedures. The authors discuss practical guidelines for the desired tightness of supplier contract terms from the three-way fit principle.

Multipurpose shopping is a prominent and relevant feature of shopping behavior. However, no methodology is available to assess empirically how the demand for multipurpose shopping depends on retail agglomeration or, in general, the characteristics of retail supply, such as the numbers and types of stores in a shopping center or the number of categories in a supermarket. The authors propose a nested-logit model that captures retail agglomeration effects on consumer choice of shopping trip purpose (what to buy) and destination (where to buy). The authors estimate parameters representing trip purpose-adjustment and between-store attraction effects on shopping trip data collected from a sample of 1704 households in The Netherlands. Both effects are significant for each of the three categories for which the model is estimated. This is consistent with the idea of agglomeration effects. The findings suggest that agglomeration helps attract not only multipurpose but also single-purpose trips. A comparison of multi- and single-purpose trip model predictions shows that single-purpose models underpredict the number of trips to larger shopping centers.

As I discuss in this commentary, these findings are noteworthy for three reasons. First, they are novel because extant perspectives on how price-quality relationships operate do not envision the process that SCA posit. Second, they are provocative because, consistent with the opening quote attributed to Einstein, the findings suggest that perceptions can occasionally influence reality. Third, the findings are potentially controversial because they raise the specter of hidden persuaders that operate in a stealthy and manipulative fashion to prey on consumers' psychological vulnerabilities (Packard 1957). But, first, some contextual background is necessary.

Previous conjoint choice design construction procedures have produced a single homogeneous design that is administered to all study participants. In contrast, this article proposes to construct a limited set of different designs. The principle of heterogeneous designs is applicable to a variety of types of models. This article illustrates this principle for Bayesian designs, taking into account prior uncertainty about the parameter values, and for mixed logit designs that accommodate respondent heterogeneity. The authors develop and investigate a computational procedure that enables quick and easy implementation. Although the number of different designs in the optimal set is small, the authors use a Monte Carlo study to demonstrate that their heterogeneous design achieves substantial gains in efficiency compared with homogeneous designs.

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 of the process-based explanation for the interaction between culture and message framing.

Customers have predictable life cycles. As a result of these life cycles, firms that sell multiple products or services frequently observe that, in general, certain items are purchased before others. This predictable phenomenon provides opportunities for firms to cross-sell additional products and services to existing customers. This article presents a structural multivariate probit model to investigate how customer demand for multiple products evolves over time and its implications for the sequential acquisition patterns of naturally ordered products. The authors investigate customer purchase patterns for products that are marketed by a large midwestern bank. Among the substantive findings are that women and older customers are more sensitive to their overall satisfaction with the bank than are men and younger customers when determining whether to purchase additional financial services, and households whose head has a greater level of education or is male move more quickly along the financial maturity continuum than do households whose head has less education or is female.

The authors investigate the changing role of marketing communication over the life cycle of a new product category. They postulate two effects of marketing communication on consumers' choices: an “indirect effect” through reduction of uncertainty about product quality and a “direct effect” (i.e., more is better). The authors expect that the indirect effect is relatively larger in the early, postlaunch stages. They develop a structural model of demand that allows for such temporal differences in the roles of marketing communication. They use a random coefficients discrete choice model with a Bayesian learning process to model physician learning about new drugs and market-level data for the prescription antihistamines category. They find that marketing communication has a primarily indirect effect 6–14 months after introduction but that the direct effect subsequently dominates. The results suggest that firms should follow a pattern of heavier communication at the introduction phase followed by lower levels.