2016 Working Papers: Marketing

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Does the sensory modality affect neural value representations?, 2 pp.
D.J. Levy
(Working Paper no. 2/2016)
Research no.: 04640100

In the current experiment we aimed to examine whether and how the way value is perceived influences the decision-making process. In brief, the experiment used tools from behavioral economics to estimate subjects’ risk preferences, and measure behavioral and neural differences in these preferences across two modalities of sensory presentation – visual and auditory.

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From perceptual bias to choice bias:  Global precedence sensitivity predicts loss aversion, 31 pp.
T. Sela and D.J. Levy
(Working Paper no. 3/2016)
Research no.: 04650100

A key tenet of psychological and economic models of choice is to explain and account for choice biases and the idiosyncratic preferences of individuals. Previous studies demonstrated that psychological constructs such as emotion and attention are important factors that mediate choice biases. However, it is not clear whether susceptibility to perceptual biases is linked with choice biases. In the current study we examined the relation between visual percepts and risk preferences in general, and loss aversion in particular. We show that manipulating visual perception via global/local presentations can influence value-based choices. Specifically, using hierarchical stimuli as a mixed gamble (large numbers composed of small numbers), we found that when monetary losses appear at the global level of the stimuli, subjects exhibit loss-aversion behavior, but when monetary gains appear at the global level of the stimuli, subjects do not exhibit loss-aversion. More importantly, we show that across subjects variability in perceptual sensitivity is correlated with variability in choice bias. That is, individual’s tendency to focus on the whole or its parts is related to the extent of loss aversion of that same individual. These results emphasize the notion that perceptual trait-like biases are directly linked to choice biases and can be used to better understand individuals’ risk preferences and the emergence of loss aversion. These findings have implications for the conceptualizations of value representation and risk perception, and highlight the importance of integrating cognitive constructs such as perceptual sensitivity into normative models of choice.

 

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When sharing is not caring: Does (un)certainty about bill payment method lead diners to consume more and spend more money?, 10 pp. 
Y. Shani
(Working Paper no. 17/2016)
Research no.: 00360100

Previous work has demonstrated that unacquainted participants in an experimental, restaurant-like setting consume more when they know in advance that the bill will be split evenly rather than paid according to individual consumption. Real life, however, often differs from these experimental settings in two important ways. First, unlike random groups of participants, diners who eat together are frequently friends or colleagues. Second, payment method (even vs. individual payment) is usually unknown (i.e. uncertain) at the time people place their orders and is determined when the check arrives. The current research tests the ecological validity of the association between consumption amount and payment method. Study 1 was conducted in a natural setting with organic groups of diners. Some were asked to state their desired payment method before ordering (Certain condition); others did so only after asking for the check (Uncertain condition).  In both conditions, even payment (as opposed to individual payment) was associated with greater consumption amount. However, overall consumption amount was lower among diners in the Uncertain condition than among those in the Certain condition. Study 2 presents a controlled follow-up experiment showing that eliminating diners’ prior expectations regarding the payment method—by informing them that the payment method will be randomly determined after the consumption decision—eliminates the relationship between payment method and consumption amount. This study further indicates that when diners are uncertain what the payment method will be even bill-splitting has negative implications for their subsequent social interactions expressed in retribution tendencies. 

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Perceived control, the promise of information, and investment decisions, 54 pp. 
S. Danziger
(Working Paper no. 19/2016)
Research no.: 02160100

Individual participation rates in the stock market are low despite impressive historical returns. The authors propose individuals often do not invest in the stock market, or they rely on professional money managers to invest, because of low-control perceptions that increase their reluctance to make active investment decisions. Building on literature showing information can boost self-efficacy, three studies demonstrate that providing low-perceived-control individuals an investment platform that promises easy access to investment information increases their efficacy-investment beliefs and consequently their willingness to use self-managed investment strategies with low portfolio turnover. These strategies yield, on average, better long-term returns than the alternatives of turning to money managers or not investing. By contrast, emphasizing that the investment platform enables easy trading does not increase these individuals’ willingness to self-invest, because trading clashes with their tendency to avoid active decision-making. Finally, the authors show individuals with low-control perceptions must perceive the provided information as easy to understand in order for it to increase their willingness to self-invest. Implications for the societal problem of individuals’ insufficient saving are discussed.

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