This paper argues that thresholds in financial contracts act as implicit nudges in consumers’ decisions. Exploiting a regulatory change to credit card minimum payments in Mexico, we find that a 1-percentage point change in minimum payments leads to a 0.87-percentage point change in actual payments, both expressed as a percentage of total balances. We decompose the effect of minimum payments into a constraining effect and a reference effect. The former captures the effect of minimum payments as a binding constraint and accounts for 59% of its total effect. The latter captures any remaining impact of changes in minimum payments beyond their constraining effect and represents 41% of the total. In turn, 67% of the reference effect is explained by the multiple heuristic: the tendency of consumers to pay whole-number multiples of the minimum payment. This paper was accepted by Kay Giesecke, finance.

In this paper, we model a firm that can reduce its carbon footprint in the presence of a segment of eco-conscious consumers, who consider the product’s carbon footprint when making purchasing decisions. The firm can reduce its controllable emissions at increased fixed and variable costs. The firm can also buy carbon offsets, at the price set by a nongovernmental organization (NGO), for both its controllable and uncontrollable emissions in the supply chain. We find that the firm should not use these two emission reduction methods as simple substitutes. In particular, as the offset price decreases, the firm may spend more efforts reducing its controllable emissions. Also, a firm’s decision to buy carbon offsets depends on the correlation between consumers’ preferences for the product function and for its environmental attributes, and this has implications for NGOs selling offsets. Specifically, although NGOs should price offsets as low as possible in most cases, we find some instances where a premium pricing strategy may be more effective in promoting lower-carbon footprint products, especially when eco-conscious consumers have a significantly higher valuation for the product than those who do not care about the environment, on average. This paper was accepted by Jayashankar Swaminathan, operations management. Supplemental Material: The data files and online appendix are available at https://doi.org/10.1287/mnsc.2021.4293 .

The service industry has become increasingly competitive. One of the main drivers for increasing profits and market share is service quality. When consumers encounter a bad experience, or a frustration, they may be tempted to stop using the service. In collaboration with the ride-sharing platform Via, our goal is to understand the benefits of proactively compensating customers who have experienced a frustration. Motivated by historical data, we consider two types of frustrations: long waiting times and long travel times. We design and run three field experiments to investigate how different types of compensation affect the engagement of riders who experienced a frustration. We find that sending proactive compensation to frustrated riders (i) is profitable and boosts their engagement behavior, (ii) works well for long waiting times but not for long travel times, (iii) seems more effective than sending the same offer to nonfrustrated riders, and (iv) has an impact moderated by past usage frequency. We also observe that the best strategy is to send credit for future usage (as opposed to waiving the charge or sending an apologetic message). This paper was accepted by Vishal Gaur, operations management.

We formulate a dynamic no-arbitrage asset pricing model for equities and corporate bonds, featuring time variation in both risk aversion and economic uncertainty. The joint dynamics among cash flows, macroeconomic fundamentals, and risk aversion accommodate both heteroskedasticity and non-Gaussianity. The model delivers measures of risk aversion and uncertainty at the daily frequency. We verify that equity variance risk premiums are very informative about risk aversion, whereas credit spreads and corporate bond volatility are highly correlated with economic uncertainty. Our model-implied risk premiums outperform standard instruments for predicting asset excess returns. Risk aversion is substantially correlated with consumer confidence measures and in early 2020 reacted more strongly to new COVID cases than did an uncertainty proxy. This paper was accepted by Haoxiang Zhu, finance.

We examine the impact of providing access to mobile savings accounts and improving financial management skills on the performance of microenterprises in Mozambique. The effects are highly heterogeneous: Combining both types of support is associated with a large increase in both short- and long-term firm profits and in financial security for female microentrepreneurs. This allowed female-headed microenterprises, particularly those with a higher level of profits at baseline, to close the gender profit gap in performance and skills relative to their male counterparts. The main drivers of improved business performance are improved financial management practices (bookkeeping), an increase in accessible savings, and reduced transfers to friends and relatives. Providing access to mobile money as a tool to save and manage finances also increases long-term profits of female microentrepreneurs, particularly for those with higher profits at baseline. However, neither treatment has any impact on male-led enterprises. Uncovering this heterogeneity in impact across different types of microenterprises can help improve the targeting of these interventions in the future. This paper was accepted by Yan Chen, behavioral economics and decision analysis. Funding: This work was supported by the International Growth Centre and the U.S. Agency for International Development [Grant AIO-OAA-F-12-00015]. Supplemental Material: The data files and Online Appendix are available at https://doi.org/10.1287/mnsc.2022.4579 .

Price discrimination strategies, which offer different prices to customers based on differences in their valuations, have become common practice. Although it allows sellers to increase their profits, it also raises several concerns in terms of fairness (e.g., by charging higher prices (or denying access) to protected minorities in case they have higher (or lower) valuations than the general population). This topic has received extensive attention from media, industry, and regulatory agencies. In this paper, we consider the problem of setting prices for different groups under fairness constraints. We first propose four definitions: fairness in price, demand, consumer surplus, and no-purchase valuation. We prove that satisfying more than one of these fairness constraints is impossible even under simple settings. We then analyze the pricing strategy of a profit-maximizing seller and the impact of imposing fairness on the seller’s profit, consumer surplus, and social welfare. Under a linear demand model, we find that imposing a small amount of price fairness increases social welfare, whereas too much price fairness may result in a lower welfare relative to imposing no fairness. On the other hand, imposing fairness in demand or consumer surplus always decreases social welfare. Finally, no-purchase valuation fairness always increases social welfare. We observe similar patterns under several extensions and for other common demand models numerically. Our results and insights provide a first step in understanding the impact of imposing fairness in the context of discriminatory pricing. This paper was accepted by Jayashankar Swaminathan, operations management. Funding: A. N. Elmachtoub was supported by the Division of Civil, Mechanical and Manufacturing Innovation [Grants 1763000 and 1944428]. Supplemental Material: The data files and online appendix are available at https://doi.org/10.1287/mnsc.2022.4317 .

We test predictions that managers issuing voluntary capex guidance learn from analyst feedback and that this learning enhances investment efficiency and firm performance. Our findings are consistent with these predictions. First, we find that managers’ capex adjustments and capex guidance revisions relate positively with analyst feedback measured by differences between postguidance analyst capex forecasts and managerial capex guidance. Second, changes in investment efficiency relate positively with analyst feedback. Third, subsequent firm financial performance relates positively with the predicted values of both managers’ capex adjustments and capex guidance revisions. These findings extend prior evidence regarding sources of managerial learning and investment efficiency and help to explain the active issuance of voluntary guidance by managers in settings where, as for capex guidance, the potential for managerial learning from related share price effects is limited, as we also explain. This paper was accepted by Brian Bushee, accounting.

We find that managers are less likely to repurchase stocks when they lose money on past stock repurchases but find no robust evidence that past gains on repurchases influence future repurchasing activity. This asymmetric sensitivity is strongest for young CEOs and those with the shortest tenure. Also, future repurchases are more sensitive to past repurchase losses for CEOs whose previous lifetime experience with the stock market is unfavorable. The sensitivity of future repurchases to past losses costs firms, on average, about 3.7% per year. When this cost is decomposed into systematic and idiosyncratic components, we find that nearly half (1.8%) comes from mistiming idiosyncratic shocks. Past losses on repurchases have a significant and negative impact on the CEO’s future bonus and increase the likelihood that future CEO termination is involuntary. We also find that negative outcomes from past repurchases encourage the subsequent use of dividends. Our findings suggest that outcomes of past repurchases have economically significant consequences through both nonbehavioral (career concerns) and behavioral (snakebite effect) factors. This paper was accepted by Tyler Shumway, finance.

We estimate the causal effects of responsible scheduling practices on store financial performance at the U.S. retailer Gap, Inc. The randomized field experiment evaluated a multicomponent intervention designed to improve dimensions of work schedules—consistency, predictability, adequacy, and employee control—shown to foster employee well-being. The experiment was conducted in 28 stores in the San Francisco and Chicago metropolitan areas for nine months between November 2015 and August 2016. Intent-to-treat (ITT) analyses indicate that implementing responsible scheduling practices increased store productivity by 5.1%, a result of increasing sales (by 3.3%) and decreasing labor (by 1.8%). Drawing on qualitative interviews with managers and quantitative analyses of employee shift-level data, we offer evidence that the intervention improved financial performance through improved store execution. Our experiment provides evidence that responsible scheduling practices that take worker well-being into account can enhance store productivity by motivating additional employee effort and reducing barriers to employees adhering to the scheduled labor plan. This paper was accepted by David Simchi-Levi, operations management. Funding: This research was supported by generous grants from the W.K. Kellogg Foundation, the Washington Center for Equitable Growth, the Robert Wood Johnson Foundation, the Institute of International Education in collaboration with the Ford Foundation, the Center for Popular Democracy, the Suzanne M. Nora Johnson and David G. Johnson Foundation, and Gap, Inc. Supplemental Material: The data files and online appendix are available at https://doi.org/10.1287/mnsc.2021.4291 .

We study capacity rationing by servers facing differentiated customer classes using data from the Veterans Health Administration, which is the largest integrated healthcare system in the U.S. Using more than 11 million health encounters over two years in which the system was capacity constrained, our study provides a comprehensive analysis of the impacts of provider availability shocks on care channel diversion and delays. The outcomes studied include emergency room (ER) visits broken down by type, urgent care center visits, office and phone visits with one’s own versus another provider, post-ER follow-up visits, and ER readmissions. Availability shocks in our analysis are a residualized measure characterizing weeks in which the provider has fewer (or more) office appointments than expected based on typical patterns. The main finding is that moving from two standard deviations above to two standard deviations below in availability shocks increases ER visits by 2.4%, or about 20,000 yearly ER visits. Interestingly, the increase in ER visits is only present for the non-emergent category, indicating differentiated service to emergent and non-emergent care requests; capacity-constrained providers still tend to the patients in most need. Another finding is that provider availability shocks delay and divert post-ER follow-up care. Yet there is no effect on ER readmissions, a severe outcome of delayed or foregone follow-up, indicating that providers ration by priority these follow-up appointments. This paper was accepted by Vishal Gaur, operations management.