A05
Transparency and Product Choice
Discussion Papers

Discussion Paper No. 140
November 8, 2021

On Factors of Consumer Heterogeneity in (Mis)Valuation of Future Energy Costs: Evidence for the German Automobile Market

Author:

Vlada Pleshcheva (HU Berlin)
Daniel Klapper (HU Berlin)
Till Dannewald (Wiesbaden Business School)

Abstract:

In this paper, we first recover the individual valuation of expected future fuel costs at the time of a car purchase and then explore how various factors relate to the recovered consumer undervaluation of fuel savings (on average, consumers' willingness-to-pay for a €1 reduction in fuel costs is below €0.20).

Keywords:

energy-efficient paradox; hedonic discrete choice model; vehicle purchase; willingness-to-pay;

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Discussion Paper No. 111
November 5, 2021

Inferring Attribute Non-Attendance Using Eye-Tracking in Choice-Based Conjoint Analysis

Author:

Narine Yegoryan (HU Berlin)
Daniel Guhl (HU Berlin)
Daniel Klapper (HU Berlin)

Abstract:

Traditionally, the choice-based conjoint analysis relies on the assumption of rational decision makers that use all available information. However, several studies suggest that people ignore some information when making choices. In this paper, we build upon recent developments in the choice literature and employ a latent class model that simultaneously allows for attribute non-attendance (ANA) and preference heterogeneity. In addition, we relate visual attention derived from eye tracking to the probability of ANA to test, understand, and validate ANA in a marketing context. In two empirical applications, we find that a) our proposed model fits the data best, b) the majority of respondents indeed ignores some attributes, which has implications for willingness-to-pay estimates, segmentation, and targeting, and c) even though the latent class model identifies ANA well without eye tracking information, our model with visual attention helps to better understand ANA by also accounting for differences in attribute processing patterns.

Keywords:

attribute non-attendance; eye tracking; discrete choice modeling; choice-based conjoint analysis;

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Discussion Paper No. 85
November 4, 2021

A Model of Ideological Thinking

Author:

Yves Le Yaouanq (LMU Munich)

Abstract:

This paper develops a theory in which heterogeneity in political preferences produces a partisan disagreement about objective facts. A political decision involving both idiosyncratic preferences and scientific knowledge is considered. Voters form motivated beliefs in order to improve their subjective anticipation of the future political outcome. In equilibrium, they tend to deny the scientific arguments advocating the political orientations that run counter to their interests. Collective denial is the strongest in societies where contingent policy is the least likely to be implemented, either because of voters' intrinsic preferences or because of rigidities in the political process. The theory predicts that providing mixed evidence produces a temporary polarization of beliefs, but that disclosing unequivocal information eliminates the disagreement.

Keywords:

beliefs; ideology; cognition; disagreement; polarization;

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Discussion Paper No. 51

Behavioral Biases in Marketing

Author:

Daniel Guhl (HU Berlin)
Daniel Klapper (HU Berlin)
Katharina Massner (LMU Munich)
Martin Spann (LMU Munich)
Lucas Stich (LMU Munich)
Narine Yegoryan (HU Berlin)

Abstract:

Psychology and economics (the mixture of which is known as behavioral economics) are two fundamental disciplines underlying marketing. Various marketing studies document the non-rational behavior of consumers, even though behavioral biases might not always be consistently termed or formally described. In this review, we identify empirical research that studies behavioral biases in marketing. We summarize the key findings according to three classes of deviations (i.e., non-standard preferences, non-standard beliefs, and non-standard decision-making) and the marketing mix instruments (i.e., product, price, place, and promotion). We thereby introduce marketing researchers to the theoretical foundation of and terminology used in behavioral economics. For scholars from behavioral economics, we provide ready access to the rich empirical, applied marketing literature. We conclude with important managerial implications resulting from the behavioral biases of consumers, and we present avenues for future research.

Keywords:

marketing; behavioral economics; behavioral biases; review;

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Discussion Paper No. 10
November 3, 2021

Pay What You Want as a Pricing Model for Open Access Publishing?

Author:

Klaus M. Schmidt (LMU Munich)
Martin Spann (LMU Munich)
Lucas Stich (LMU Munich)

Abstract:

We analyze “Pay What You Want” as a business model for Open Access publishing by discussing motives leading authors to make voluntary contributions, potential benefits for publishers and present results from a field experiment at one publisher. Data from the field experiment indicate authors’ willingness to voluntarily contribute.

Keywords:

gold open access; article processing charges; costumer-driven pricing; voluntary contributions; field experiment;

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Discussion Paper No. 8
November 2, 2021

Delegating Pricing Power to Customers: Pay What You Want or Name Your Own Price?

Author:

Florentin Krämer (LMU Munich)
Klaus M. Schmidt (LMU Munich)
Martin Spann (LMU Munich)
Lucas Stich (LMU Munich)

Abstract:

Pay What You Want (PWYW) and Name Your Own Price (NYOP) are customer- driven pricing mechanisms that give customers (some) pricing power. Both have been used in service industries with high fixed costs to price discriminate without setting a reference price. Their participatory and innovative nature gives rise to promotional benefits that do not accrue to posted-price sellers. We explore the nature and effects of these benefits and compare PWYW and NYOP using controlled lab experiments. We show that PWYW is a very aggressive strategy that achieves almost full market penetration. It can be profitable if there are promotional benefits and if marginal costs are low. In contrast, NYOP can be used profitably also if marginal costs are high and if there are no such benefits. It reduces price competition and segments the market. In a second experiment, we generate promotional benefits endogenously. We show that PWYW monopolizes the follow-up market but fails to be profitable. NYOP is less successful in penetrating the market but yields much higher profits.

Keywords:

customer-driven pricing mechanism; pay what you want; name your own price; competitive strategies; marketing; laboratory experiment;

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