Time: 12:00 - 1:30 pm
Location: L-126 Carlson School
Who: Kevin Williams, PhD Candidate, University of Minnesota - Department of Economics
Title: Zone Pricing and Spatial Menu Costs: Evidence from Drywall
Abstract: In the empirical industrial organization literature, the standard approach models prices as being set at the market level. In practice, retail firms often use zone pricing; that is, they set uniform prices over large geographically contiguous areas. In this paper, we conduct an empirical analysis of zone pricing for the two largest home improvement retailers in the United States. We introduce the concept of "spatial menu costs," which we interpret as a type of friction that has induced firms to set the zone price structure we observe. Using a new micro-level data set, we estimate prices and profits under different pricing regimes to find bounds on the spatial menu costs needed to force zone pricing. We find that even small spatial menu costs can prompt zone pricing and deter retailers from using market power in their monopoly markets. We also evaluate the role zone pricing has on the competitive interaction of firms. In particular, we find that market level pricing in the absence of menu costs would bring lower industry profits compared to the observed zone structure.
Time: 12:00 - 1:30 pm
Location: L-126 Carlson School
Who: Xiaolin Li, Marketing PhD Candidate, University of Minnesota - Carlson School of Management
Title: The "Shadow of the Future" in IT Procurement Bids
Abstract: The procurement of complex goods and services involving large transactions between firms, or between government and private firms, is very common, e.g., governments engaging construction firms to construct highways, and corporate firms outsourcing tasks to specialist vendors. These situations share a number of features; the tasks are complex and long drawn out; these agreements are governed by detailed contracts that describe the client's expectations about deliverables, the expected payments, and mechanisms for the resolution of disputes. Finally, the contractor is often selected via a competitive sealed bid auctions.
A striking empirical fact is that these large transactions are almost always subject to changes during the execution phase. It is reasonable to suppose that an anticipation of these changes would be an important part of the bidding calculus of contractors. Surprisingly, the prior literature has almost completely ignored this "shadow of the future" in examining these transactions.
This paper attempts to address the gap just identified by trying to quantify the "shadow the future". The challenge is to set up a mathematical model of bidding behavior wherein far-sighted bidders recognize the possibility of future changes and adjust their bids accordingly. I develop and apply such a model to a comprehensive dataset of IT procurement transactions, and overcome significant methodological hurdles to estimate the "shadow of the future". I find that this shadow has a significant effect on winning bids. On average, the shadow of the future accounts for almost half of the size of the winning bids.
Time: 8:00 am - 6:00 pm
Location: 2-260R Carlson School (Executive Center Suite)
*By invitation only
The Minnesota Camp brings to our campus, four top researchers in the field of marketing for a full day of presentations and research interactions. The goal is to foster academic inquiry via exposure to and collaboration with top minds in the field. This initiative started in 2012. The camp not only aims to energize the passion for research among our faculty and PhD students, but also to showcase our expertise and superb facilities.
Sponsored by: Institute for Research in Marketing
Who: Pradeep Chintagunta, Professor of Marketing, University of Chicago - Booth School of Business
Abstract: While researchers have documented a positive relationship between the average quality of a service and customer retention, the effect of variability on customer retention has been viewed more ambiguously in the literature. We investigate the roles of the level and variability in quality in the context of a new video on demand service in driving customer retention. We find that while high average quality helps in retaining customers, high variability leads to higher termination rates. Apart from these main effects we empirically document the presence of an interaction effect between average service quality and its variability on termination rates; customers who experience low variability are more responsive to mean quality compared to those experiencing high variability. As an extreme outcome, at the lower end of the quality spectrum, customers experiencing high variability have a higher retention rate than those experiencing low variability; this is contrary to what the main effect of variability would imply. We postulate a mechanism involving risk aversion and learning, which can induce this interaction effect and test this against several alternative explanations. Our results reinforce the notion that high service quality is associated with lower termination rates. Moreover, our estimates suggest that households exhibit risk aversion, implying that, on average, variability increases termination. Based on the model and estimation results, we document that in the context of new services where customers are likely to learn about their quality, households that experience low variability in service are more likely to be more responsive to the quality level. This differential responsiveness results in an interaction effect between service quality level and its variability. In terms of managerial implications, we show that while increasing the average quality might be effective in retaining customers at low quality levels, lowering variability is likely to be more appropriate at high quality levels.
Who: Amna Kirmani, Professor of Marketing, University of Maryland - Smith School of Business
Title: Which Agent Will You Choose: The Moral or the Competent?
Abstract: Consumers often make tradeoffs between competence and morality when choosing among financial advisors, salespeople and other agents. A couple selling their house might be torn between real estate agent A, who is a top producer in her firm but is rumored to cheat on her expense accounts, and agent B who has only a moderately good selling record but is known for being honest. In this example, one agent is highly competent but morally deficient and the other is less competent but stands on highter moral ground. Competence reflects an agent's skill or effectiveness in achieving goals, while morality reflects an agent's honesty. In this paper, we examine how consumers make tradeoffs between the competence and morality of agents in situations in which competence and morality are independent, meaning that the success of the agents is not due to their immoral behavior.
The trade-off involves at least two goals: upholding the value of behaving morally and the goal of being successfully accomplishing the taks for which the agent is being hired. Economic self-interest would dictate that consumers choose the competent agent, as this will further their hiring-related goal. We examine the situation when consumers choose a moral agent against their economic self-interest and test the hypotheses in four studies.
Who: Michael Norton, Associate Professor of Business Administration, Harvard Business School
Abstract: Can money make you happy? Our research suggests that it can - if you give it away. We show that encouraging people to spend on others - for example, by giving them $20 in the morning and asking them to give it away by the end of the day - makes people happier than spending on themselves. In addition, the positive impact of behaving charitably can improve organizational health. When we gave employees in two organizations "prosocial incentives" (bonuses for themselves), both employee satisfaction and job performance improved dramatically. I will discuss how these findings change the way organizations should think about incentivizing employees - and how we should think about spending our own money.
Who: Jiwoong Shin, Associate Professor of Marketing, Yale School of Management
Title: Managing Buzz
Abstract: We model the incentives of individuals to engage in word of mouth (or buzz) about a product, and how a firm may strategically influence this process through its information release and advertising strategies. Individuals receive utility by improving how others perceive them. A firm restricts access to information, advertising may crowd out word of mouth and a credible commitment not to engage in advertising is valuable for a firm. Finally, we find that the ability of the firm to target advertising to well-connected consumers may be detrimental to the signaling value of word of mouth.
We hope you can attend one of our upcoming Brand Matters events here at the Carlson School!
To register: http://www.carlsonschool.umn.
Wednesday, October 30, 2013
Speaker: Carlos Torelli, Carlson School of Management
Tuesday, September 17, 2013
Speaker: Krae Lausch, Life Time Fitness
Who: Christopher Federico, Associate Professor of Psychology and Political Science, University of Minnesota
Title: "Ideological Asymmetry in the Relationship Between Needs for Certainty, Order, and Security and Political Interest and Engagement"
Abstract: In this paper, we argue that those high in needs for certainty, order, and security will show less political interest and engagement when their beliefs imply goals that run counter to these needs. Specifically, these needs should be associated with reduced interest and engagement to a greater extent on the political left than on the right because left-leaning politics which challenges the status quo threatens more instability and uncertainty. Data from four surveys of Americans and Europeans provide evidence for this with respect to the need for closure (Study 1), the authoritarian predisposition (Study 2), and security and conformity values (Study 3). Moreover, comparative data from Study 3 indicated that this interaction was found in "Westernized" political cultures, in which the traditional left-right difference is clearly defined, but not in Eastern European countries, where its meaning is less distinct due to a recent communist past and rapid transition to democracy.
Time: 12:00 - 1:30 pm
Location: 2-224 Carlson School
Who: Raghunath Rao, Assistant Professor of Marketing, University of Texas at Austin - McCombs School of Business
Title: Conspicuous Consumption and Dynamic Pricing
Abstract: How do firms develop strategy when consumers seek to satisfy both quality and status-related considerations? Our analytical model seeks to help us understand this issue, examining both pricing and product management decisions in markets of conspicuous durable goods. Our analysis yields many interesting and non trivial insights. First, we demonstrate that high intrinsic quality indirectly generates exclusivity via pricing effects; in turn, this exclusivity conveys high social status to a large audience when consumption is greatly visible. This insight reverses the direction of causality in the existing literature, wherein only status considerations matter and mere price increases may enhance consumer utility. Second, our dynamic model indicates that more visible products earn greater profits in equilibrium; however, since visible products entail status motivations, these items endure substantially higher price depreciation. Third, we examine the product management strategies used by firms to preserve early adopter exclusivity. Finally, we discuss the boundary conditions of our results, as well as our results' implications for managerial and policy issues.
Time: 12:00 - 1:30 pm
Location: 2-224 Carlson School
The Minnesota Camp brings to our campus, four top researchers in the field of marketing for a full day of presentations and research interactions. The goal is to foster academic inquiry via exposure to and collaboration with top minds in the field. This initiative was initiated last year. The camp not only aims to energize the passion for research among our faculty and PhD students, but also to showcase our expertise and superb facilities.
Time: 8:00 am - 6:00 pm
Location: 2-260R Carlson School (Executive Center Suite)
Who: Darren Dahl, Professor of Marketing, University of British Columbia - Sauder School of Business
Title: Earning the Right to Eat Organic: How Moral Judgments Depend on the Nature of the Target's Income
Abstract: The current research takes a behavioral ethics approach to examining how individuals are evaluated differently according to societal norms based on income for engaging in the same prosocial activity â€“ namely, purchasing organic food. We propose that because organic food is associated with both health and wealth, the moral judgments people form of consumers and organizations (e.g., charities) who buy organic versus conventional food will differ based on the nature of the targetâ€™s income. More specifically, across seven studies we demonstrate that organic food choices polarize moral judgments: whereas high-income individuals choosing organic food (versus conventional) are perceived as significantly more moral, those in the lowest income bracket who are receiving government assistance are perceived as significantly less moral. In so doing, our work makes an important contribution to the literature by showing that the same prosocial action may lead to opposing moral judgments depending on who committed the act.
Who: Sharon Shavitt, Professor of Business Administration and Marketing, University of Illinois at Urbana-Champaign
Title: How Does Cultural Self-Construal Affect Price-Quality Judgments?
Abstract: Is there a relation between cultural factors and consumers' tendency to use price to judge quality? Several experiments designed to address this question revealed that people with a more interdependent (vs. independent) cultural self-construal - operationalized by ethnicity, nationality, measured self-construal, or manipulated salient self-construal - have a greater tendency to use price information to judge quality. This difference arises because interdependents tend to be holistic (vs. analytic) thinkers who are more likely to perceive interrelations between the ele- ments of a product. These effects hold regardless of whether the price- quality relation was assessed with a standard self-report scale or via actual product judgments, and whether thinking style was measured or manipulated. However, cultural differences only emerged in situations that afforded interdependents (vs. independents) a relational processing advantage. These findings establish the mechanisms underlying the effects and identify novel boundary conditions for the influence of self-construal and thinking style on consumer judgments.
Who: K. Sudhir, Professor of Private Enterprise, Management and Marketing, Yale School of Management
Title: A Dynamic Structural Model of Search across Stores and across Time
Abstract: Price dispersion across stores and across time is widespread in many retail settings; in response, consumers can search across stores and across time. Yet the existing literature on structural models of search focuses either on modeling search across stores or across time but not both. This paper introduces a dynamic structural model that nests a finite horizon model of search across stores within an infinite horizon model of search over time. We formulate the dynamic structural model estimation problem as a mathematical program with equilibrium constraints (MPEC), and embed it within an iterative E-M algorithm that accommodates latent class heterogeneity. We use data on household choice in the milk category to estimate the model. Omitting either the across-store or across-time dimension of search biases the estimated search costs and price elasticity - suggesting the importance of accounting for both dimensions in structural models of search. Further; we provide intuition for how the direction of bias is dependent on the relationship between purchase and promotional frequency. Finally, contrary to conventional wisdom that promotions increase cherry picking behavior, we find that in the presence of search costs, price promotions can be a loyalty enhancing device for stores.
Who: Gerry Tellis, Professor of Marketing, University of Southern California - Marshall School of Business
Title: Make, Buy, or Ally: Patterns and Paradoxes in Making versus Buying for Innovations
Abstract: Firms constantly grapple with the question of whether to internally develop (make), acquire (buy) or partner (ally) for innovations. The literature has not analyzed the choice of and payoff to these alternate routes to innovation for the same firm. To address this issue, the authors collect and analyze the choice and payoff to 3260 make, buy, and ally for innovations for 192 firms across 108 industries over a period of 5 years.
The authors find that on average, make and ally generate positive and highter payoff than buy, which generates a negative payoff. Nevertheless, firms continue to buy for two reasons. First, firms seem to have no memory for the payoff to buy even though they have a memory for the payoff to make. Second, firms tend to buy when they lack commercializations, even though the stategy seems not to pay off. These results suggest that firms see buy as a quick fix for what may be a deep strategic problem. Nevertheless, buy can pay off if acquirers are experienced and the target is related and offers high customer benefit. Conversely and surprisingly, make and ally each pay off for unrelated innovations. The authors offer explanations for and implications of the results.
Who: Paola Mallucci, Marketing PhD Student, University of Minnesota - Carlson School of Management
Title: "The Effect of Social Pressure on Corporate Social Responsibility"
Abstract: The goal of this study is to better understand consumers' reactions to
products associated with Corporate Social Responsibility (CSR). I
identify â€œwarm glowâ€ and â€œsocial pressureâ€' as the two principal
drivers. On one hand, products offered by CSR-engaged firms are more
appealing because of the warm glow consumers derive from choosing a
product associated with a donation to their favored causes; such
products directly enhance customer utility. On the other hand, once
donations reach a threshold amount, consumers might feel social pressure
to reciprocate the firm's donation. While such pressure can move some
consumers to purchase the product, it reduces utility and can lead some
consumers to opt out of the market. Plainly, warm glow is favorable to
selling CSR products, but does social pressure aversion imply that
rational firms will never employ such appeals? Large numbers of firms do
rely on social pressure-based appeals (e.g., the Pink theme campaign
for breast cancer). When and why is this a wise choice?
In two separate experiments, I find evidence for warm glow and social pressure effects. I formalize and quantify these effects with a novel utility function that embodies these opposing effects and find them to be of the same order of magnitude; hence, both are managerially relevant. To develop this idea further, I build a model of a profit-maximizing firm that recognizes these warm glow and social pressure aversion preferences of its customers. Under both monopolistic and duopolistic market structures, I show that if warm glow is large enough, a firm will also engage in social pressure appeals, despite its customers' aversion to social pressure. Put differently, despite the negative effect on consumers' preferences, employing social pressure in a CSR context can be profitable. Why? Intuitively, social pressure diminishes price sensitivity.
Friday, September 21, 2012
Who: Linli Xu, Assistant Professor of Marketing, University of Minnesota - Carlson School of Management
Title: "Price Advertising by Multiple Channel Members"
Abstract: The central prediction of this paper is that manufacturer price advertising is less effective than dealer price advertising. Two experiments show that consumers who received a price advertisement from an automobile manufacturer indicate lower potential demand than consumers who received a price advertisement from a dealer. An econometric analysis of market data shows a pattern of results consistent with the experimental results: dealer price advertising is estimated to have larger effects on both perceived quality and price sensitivity than manufacturer price advertising. Counterfactual experiments suggest that a unified channel would shift 7-11% of its price advertising budget from the manufacturer to the dealer.
Friday, October 19, 2012
Who: Jannine Lasaleta, Marketing PhD Student, University of Minnesota - Carlson School of Management
Title: "Nostalgia Weakens the Desire for Money"
Abstract: Nostalgia is prevalent in the marketing of goods and services. The current research tested whether its effectiveness is due to the fact that nostalgia weakens the desire for money. Drawing theoretical connections among nostalgia, desire for money, and meaning in life, five experiments demonstrated that nostalgia weakens the desire for money using perceptual, behavioral, and cognitive measures. Process evidence demonstrated that nostalgiaâ€™s influence on desire for money is due to its potential to heighten perceptions of meaning in life.
Friday, October 26, 2012
Who: Joseph Redden, Assistant Professor of Marketing, University of Minnesota - Carlson School of Management
Title: "Two Approaches to Encourage Healthier Eating"
Abstract: Obesity is a growing public health concern in the United States, especially among minority populations. This research will talk about two different approaches to encourage healthier eating. The first approach examines the role of satiation in managing the consumption of healthy and unhealthy foods. Specifically, we find in a series of studies that people with greater trait self-control satiate faster on unhealthy foods because they devote more attention to how much they are eating (and vice versa for healthy foods). The second approach tests the effectiveness of three "nudges" in encouraging elementary school children to eat more vegetables. Study 1 finds that a 50% larger portion increased carrot and orange intake 49% and 154% respectively, Study 2 created norms using photos on trays to increase carrot and green bean intake 177% and 133% respectively, and Study 3 served carrots first and increased intake 430%.
Friday, November 9, 2012
Who: Maria Ana Vitorino, Assistant Professor of Marketing, University of Minnesota - Carlson School of Management
Title: "Drip Pricing when Consumers have Limited Foresight: Evidence from Driving School Fees"
Abstract: This paper empirically investigates the add-on pricing behavior of firms in the Portuguese market for driving instruction. We develop a framework along the lines of Gabaix and Laibson (2006) where consumers purchase a base and, with some probability, an add-on product from the same firm, but are not always aware of the possible need for the add-on product. We show that a typical loss-leader pricing strategy emerges in horizontally differentiated markets whereby markups on the base product are artificially lowered, while firms price the add-on at monopoly levels. We test the implications of the model using a detailed snapshot of industry data on student characteristics and preferences, school attributes including prices and costs, and market demographics for a cross-section of local markets with differing numbers of school competitors. We find significant evidence in support of our model predictions, including that firms face a substantial profit motive in the add-on market. Most notably, markups for the base product, but not the add-on products, decline in the number of competitors a firm faces, a prediction that has not been established in the literature to date.
Tuesday, November 20, 2012
Who: Roy Baumeister, Eppes Eminent Professor of Psychology, Florida State University
Title: "How Rejection Affects People"
Abstract: If the need to belong is one of the most important foundations of human motivation, then social rejection, which thwarts that need, should produce striking effects. This talk covers the past decadeâ€™s work in my laboratory on how social rejection affects people. Their behavior changes drastically, including effects on aggression, helping, self-defeating behavior, intelligent performance, self-regulation, and the rational pursuit of enlightened self-interest. It explores cognitive factors and emotional ones. Surprisingly, the immediate impact of aggression appears to involve a numbness akin to shock reactions, characterized by a loss of emotion and even of sensitivity to pain.
If you have any questions regarding the Marketing Seminar Series, please contact:
Melissa Grass, Ph. (612) 624-3841; firstname.lastname@example.org