2020 - Working Papers: Marketing

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Homophily and influence: Pricing to harness word-of-mouth on social networks, 73 pp.
P. P. Zubcsek, T. Q. Phan and X. Lu 
(Working Paper no. 5/2020)
Research no.: 04380100

Large-scale social platforms have enabled marketers to obtain rich data on the structure of wordof-mouth (WOM) networks and the correlation of friends’ preferences (network assortativity). We study how the similarity or difference of friends’ reservation prices for a product should affect the optimal price and advertising levels for that product. To this end, we build an analytical model of informative advertising and pricing over a social network. Connections between consumers are added in a way that allows neighbors’ preferences to be positively or negatively correlated, thereby introducing homophily or heterophily in the model. Consumers may learn about products either directly via advertising, or via WOM spread by their peers who have adopted a product. We find that in the typical scenario when blanket advertising is not affordable, firms set a price lower than the naïve optimum in order to leverage the social value of more price-sensitive customers. We also characterize the relationship between assortativity and the marketing instruments (price and advertising) of the firm, to find that either instrument may be substitutes or complements with assortativity depending on the niche or mainstream appeal of the product, the cost of advertising, the overall connectivity, and the assortativity of the network.

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Doing good – Looking good: The effect of prosocial behavior on the perception of physical beauty, 1 pp. 
N. Kononov and D. Ein-Gar
(Working Paper No. 11/2020)
Research No.: 00421100

We examined the association between inner moral beauty and outer physical beauty, and explored the effect of prosocial behavior on the perception of physical beauty. We find that individuals who act prosocially are perceived as more physically beautiful. Prosociality influences beauty perception more than other perceptions (e.g. intelligence, humor) suggesting that this is beyond a halo effect.

 

 

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Upgrading my look, upgrading my act: The effect of appearance improvements on charitable giving, 5 pp.
N. Kononov, D. Ein-Gar and S. Puntoni
(Working Paper No. 12/2020)
Research No.: 00420100

People spend a great deal of time and money to look more beautiful. Because of their nature, the efforts to improve appearance reflect self-focus. Thus, an improvement of physical appearance might not be expected to evoke other-focused behavior such as prosocial behavior. However, across four experiments, we show counterintuitively that when individuals improve their physical appearance, they donate and volunteer more as a result of heightened public self-awareness. We observe the effect while accounting for positive mood.

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