Discussion Paper No. 346
November 10, 2022
When Transaction-Level Wage Transparency Can Increase Consumer Preference
Authors:
Stich, Lucas (LMU Munich)Ungemach, Christoph (TU Munich)
Fuchs, Christoph (University of Vienna)
Spann, Martin (LMU Munich)
Abstract:
Firms are usually reluctant to disclose information about the production costs of their goods and services; however, some firms have recently started to disclose cost information to consumers. This research examines the consequences of disclosing transaction-level wage information on consumer preferences. Six experiments, both in field and lab settings across multiple service domains, document that disclosing a service worker’s compensation can increase consumer preference for that firm’s service if the compensation is sufficiently high (i.e., perceived as fair by consumers). This greater preference for services provided in a fair-wage setting is driven by consumers’ feelings of anticipated guilt and higher expectations concerning quality. Available social norms regarding fair compensation and the nature of the service worker (human vs. non- human) are both identified as important boundary conditions of the proposed process. This research offers a first step toward understanding the psychological and behavioral consequences of disclosing transaction-level wage information to consumers, thereby enabling managers to better identify when they should disclose wage information as part of their marketing strategy. This research also informs policy makers on how to encourage social preferences and consumer choices in order to promote fair outcomes for consumers, firms, and workers.
Keywords:
transaction-level wage transparency; social preferences; fairness; pricing; wage inequalityDownload:
Open PDF fileDiscussion Paper No. 343
October 24, 2022
The Impact of Uncertainty on Customer Satisfaction
Authors:
Back, Camila (LMU Munich)Spann, Martin (LMU Munich)
Abstract:
Customer satisfaction is an important metric to predict customer behavior and as a result firms' profitability. Expectations of a product's performance serve as a reference point against which customers evaluate their satisfaction with the products' actual performance. However, what is the effect of uncertainty in expectations? This paper develops a novel theoretical model of satisfaction, in which expectations reflect distributions of individual beliefs about performance outcomes. Based on this model, uncertainty shifts subjective reference points upward. That is, uncertainty increases the performance level at which customers switch from being dissatisfied to being satisfied. Furthermore, uncertainty has an attenuating effect on both positive and negative deviations of actual performance from subjective reference points. Put differently, a bad performance feels less bad and a good performance feels less good when it is expected, compared with unexpected. The authors find support for the model's predictions in an experimental study on product delivery as well as a field study based on online reviews. In addition, the authors develop a model-based tool that predicts the effect of uncertainty on customer satisfaction across different customizable scenarios. The paper's results carry implications for firms' communication, customer valuation and recovery strategies.
Keywords:
customer satisfaction; uncertainty; probabilistic beliefs; prospect theoryDownload:
Open PDF fileDiscussion Paper No. 331
July 7, 2022
Charitable Giving by the Poor
A Field Experiment in Kyrgyzstan
Authors:
Adena, Maja (WZB Berlin)Hakimov, Rustamdjan (University of Lausanne and WZB Berlin)
Huck, Steffen (WZB Berlin and UCL)
Abstract:
In a large-scale natural field experiment, we partnered with a micro-lending company in Kyrgyzstan that asked over 180,000 of its clients for donations to social projects as a form of corporate philanthropy. In a 2×2 design, we explored two main (pre-registered) hypotheses about giving by the poor. First, based on a conjecture that poor are more price sensitive than the rich and in contrast to previous studies, we hypothesize that matching incentives induce crowding in of out-of-pocket donations. Second, we hypothesize that our population cares about their proximity to the charitable project. We find evidence in favor of the former hypothesis but not the latter.
Previous studies of charitable giving focus on middle- or high-income earners in Western countries, neglecting the poor, although the lowest income groups are often shown to contribute substantial shares of their income to charitable causes. Our results challenge the evidence in the extant literature but are in line with our theoretical model. The implications for fundraising managers are that the optimal design of fundraising campaigns crucially depends on the targeted groups, and that donation matching is successful in stimulating participation in poorer populations.
Keywords:
charitable giving; field experiments; matching donationsJEL-Classification:
C93; D64; D12Download:
Open PDF fileDiscussion Paper No. 328
May 12, 2022
A Field Experiment on Threshold Matching of Donations
Authors:
Adena, Maja (WZB Berlin)Huck, Steffen (WZB Berlin and UCL)
Abstract:
We study a form of threshold matching in fundraising where donations above a certain threshold are topped up with a fixed amount. We show theoretically that threshold matching can induce crowding in if appropriately personalized. In a field experiment, we explore how thresholds should be chosen depending on past donations. The optimal choice of thresholds is rather bold, approximately 75% above past donations. Additionally, we explore how thresholds should be set for new donors as a function of their personal characteristics and demonstrate the benefits of personalization as opposed to setting a general threshold that applies to all recipients of a fundraising call.
Keywords:
charitable giving; field experiments; matching donations; personalizationJEL-Classification:
C93; D64; D12Download:
Open PDF fileDiscussion Paper No. 326
May 5, 2022
Voluntary ‘Donations’ versus Reward-Oriented ‘Contributions’: Two Experiments on Framing in Funding Mechanisms
Authors:
Adena, Maja (WZB Berlin)Huck, Steffen (WZB Berlin and UCL)
Abstract:
In an artefactual field experiment, we implemented a crowdfunding campaign for an institute's summer party and compared donation and contribution framings. We found that the use of the word 'donation' generated higher revenue than the use of 'contribution'. While the individuals receiving the donation framing gave substantially larger amounts, those receiving the contribution framing responded more strongly to reward thresholds and suggestions. An additional survey experiment on MTurk indicated that the term 'donation' triggers more positive emotional responses and that emotions are highly correlated with giving. It appears that making a donation is perceived as a more voluntary act and is thus more successful at generating warm glow than making a contribution. We surmise that this extends to other funding mechanisms.
Keywords:
crowdfunding; field experiment; framingJEL-Classification:
C93; D64; D12Download:
Open PDF fileDiscussion Paper No. 319
February 18, 2022
COVID-19 and Pro-Sociality: How Do Donors Respond to Local Pandemic Severity, Increased Salience, and Media Coverage?
Authors:
Adena, Maja (WZB Berlin)Harke, Julian (WZB Berlin)
Abstract:
Has the COVID-19 pandemic affected pro-sociality among individuals? After the onset of the pandemic, many charitable appeals were updated to include a reference to COVID-19. Did donors increase their giving in response to such changes? In order to answer these questions, we conducted a real-donation online experiment with more than 4,200 participants from 149 local areas in England and over 21 weeks. First, we varied the fundraising appeal to either include or exclude a reference to COVID-19. We found that including the reference to COVID-19 in the appeal increased donations. Second, in a natural experiment-like approach, we studied how the relative local severity of the pandemic and media coverage about local COVID-19 severity affected giving in our experiment. We found that both higher local severity and more related articles increased giving of participants in the respective areas. This holds for different specifications, including specifications with location fixed effects, time fixed effects, a broad set of individual characteristics to account for a potentially changing composition of the sample over time and to account for health- and work-related experiences with and expectations regarding the pandemic. While negative experiences with COVID-19 correlate negatively with giving, both approaches led us to conclude that the pure effect of increased salience of the pandemic on pro-sociality is positive.
Despite the shift in public attention toward the domestic fight against the pandemic and away from developing countries’ challenges, we found that preferences did not shift toward giving more to a national project and less to developing countries.
Keywords:
COVID-19; charitable giving; online experiments; natural experimentsJEL-Classification:
C93; D64; D12Download:
Open PDF fileDiscussion Paper No. 276
February 5, 2021
Do Robo-Advisors Make Us Better Investors?
Author:
Back, Camila (LMU Munich)
Morana, Stefan (Saarland University)
Spann, Martin (LMU Munich)
Abstract:
Investors increasingly can obtain assistance from “robo-advisors,” artificial intelligence–enabled digitalized service agents imbued with anthropomorphic design elements that can communicate using natural language. The present article considers the impact of anthropomorphized robo-advisors on investment decisions, with a focus on their ability to mitigate investors’ behavioral biases. We study the well-documented disposition effect, which reflects investors’ greater propensity to realize past gains than past losses. In two induced-value laboratory experiments, the availability of a robo-advisor reduces (i.e., mitigates) investors’ disposition effect. This relationship is mediated by two simultaneous (indirect) effects: the extent of requests for the robo-advisor’s investment advice and perceptions of its socialness. These findings resonate with cognitive dissonance theory, which predicts that assigning responsibility to the advisor helps investors resolve a sense of discomfort that may arise after a financial loss. Anthropomorphic design elements alone are not sufficient to reduce the disposition effect, but they decrease investors’ propensity to seek advice, which offsets the positive (indirect) effect of perceived socialness. These results have implications for the ongoing automation of advisory services, as well as for improving decision making, and suggest some further research directions.
Keywords:
robo-advisors; artificial intelligence; advice; anthropomorphism; disposition effect
JEL-Classification:
D91; D83; D84; G11; G41
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Discussion Paper No. 271
January 19, 2021
Paying for Open Access
Author:
Stich, Lucas (LMU Munich)
Spann, Martin (LMU Munich)
Schmidt, Klaus M. (LMU Munich)
Abstract:
Open access (OA) publishing upends the traditional business model in scientific publishing by requiring authors instead of readers to pay for the publishing-related costs. In this paper, we aim to elicit the willingness to pay (WTP) of authors for open access publishing. We conduct two separate field studies with different methodological approaches in different scientific disciplines (economics and medicine). First, a choice-based conjoint (CBC) analysis measures stated preferences of 243 economists in Germany, Austria, and Switzerland regarding their valuations of open access publishing in the “Top 5” economics journals. Second, a field experiment at four different open access medical journals elicits authors’ self-determined (“Pay-What-You-Want”) payments for open access publications. The results provide a plausible range of authors’ valuations, given that the first study rather provides an upper bound and the second study a lower bound of authors’ willingness to pay for open access publishing.
Keywords:
open access; willingness to pay; choice-based conjoint analysis; pay-what-you-want; field experiment
JEL-Classification:
D12; M31; L11; L82
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Discussion Paper No. 248
June 21, 2020
Dynamic Pricing in a Digitized World
Author:
Spann, Martin (LMU Munich)
Skiera, Bernd (Goethe University Frankfurt)
Abstract:
Digital technologies favor the use of dynamic pricing, i.e., prices that vary unannounced for a product that basically remains unchanged. However, different forms of dynamic pricing are often mixed in the public discussion, which makes a meaningful analysis of the advantages and disadvantages of dynamic pricing difficult. The aim of this paper is to present the economic foundations of dynamic pricing as well as to discuss and to classify its design options. In addition, the paper assesses dynamic pricing from a buyer and seller perspective. Finally, the paper discusses implications for business research.
Keywords:
Dynamic pricing; price differentiation; price discrimination; digitization
JEL-Classification:
M30; D40; D10
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Discussion Paper No. 216
December 13, 2019
Intertemporal Preferences and the Adoption Decision for Bluetooth Speakers
Author:
Guhl, Daniel (HU Berlin)
Klapper, Daniel (HU Berlin)
Abstract:
The adoption decision for durable goods is intertemporal by definition. However, estimating utility and discount functions from revealed preference data using dynamic discrete choice models is difficult because of an inherent identification problem. To overcome this issue, we use stated preference data. Specifically, we employ the experimental design of Dubé, Hitsch, and Jindal (2014), where future prices are known and that elicits intertemporal adoption decisions for Bluetooth speakers in a discrete choice framework. We estimate several models of discounting (e.g., static, myopic, geometric, and quasi-hyperbolic) and find considerably lower discount factors than typical market interest rates would suggest. The values are also smaller compared to respondents’ matching-based discount factors, even though the correlation is positive and significant. Furthermore, there are substantial differences in discounting across respondents (i.e., heterogeneity in time-preferences) and lastly, there is no strong empirical evidence for quasi-hyperbolic discounting. Thus, the standard economic model seems to be appropriate for the data at hand.
Keywords:
intertemporal preferences; dynamic discrete choice models; durable goods adoption
JEL-Classification:
C35; D9; D12; M31