STRATEGIC INFORMATION DISCLOSURE: THE CASE OF MULTIATTRIBUTE PRODUCTS WITH HETEROGENEOUS CONSUMERS

We examine the incentives for firms to voluntarily disclose otherwise private information about the quality attributes of their products. In particular, we focus on the case of differentiated products with multiple attributes and heterogeneous consumers. We show that there exist certain configurations of consumers' multidimensional preferences under which a firm, no matter whether producing a high‐ or low‐quality product, may choose not to reveal the quality even with zero disclosure costs. The failure of information unraveling arises when providing consumers with more information results in more elastic demand, which triggers more intensive price competition and leads to lower prices and profits for competing firms. As a result, the equilibrium in which disclosure is voluntary may diverge from that in which disclosure is mandatory. (JEL L15, L5)     

Food Expensiveness in Scotland's Remote Areas: An Analysis of Household Food Purchases☆

The purpose of this paper is to investigate whether consumers in Scotland's remote areas suffer from food prices that are higher than the average national prices (i.e., whether a “remoteness premium” exists). The question has been raised by several organizations in those communities looking at the high prices in local stores. This paper provides a new perspective using actual purchasing prices of a sample of 5,252 households in Scotland for 2017 and 2018. In this way, households' ability to shop for lower prices is considered, unlike in previous studies. An expensiveness index was computed to measure the expensiveness of food at household level and control for differences in quality. It showed that consumers in remote areas pay a small premium (0.3 to 0.4 percent) with respect to average prices, which is statistically significant but economically not relevant. To understand the effect of several factors, AHEI was regressed on a number of explanatory variables including local area characteristics and household demographics and consumers' shopping strategy. The results were used to simulate three hypothetical scenarios related to impact of changes in the population's age, access to discount stores, and social deprivation on food expensiveness.     

The role of affective choice mode in the consumer purchase of expressive products

Based on Zajonc's (1980) thesis, a concept of Affective Choice Mode is developed. It is argued that when products are expressive (i.e., they are sought for psycho-social goals rather than for utilitarian goals), then the predominant mode of consumer brand selection is the affective choice mode. This mode is contrasted with the traditionally assumed information processing mode. Using survey data from 192 consumers and employing LISREL analyses it is shown that (a) although involvement leads to information processing, (b) expressiveness makes affective choice mode more likely, which in turn (c) suppresses information processing. Research and managerial implications of the present work are discussed.     

Getting Real About Food Prices

The 2008 spike in world grain prices is widely recognised to have had serious impacts on food security and poverty, but these high grain prices are commonly described as low in historical terms – an inconsistency resulting from the use of advanced‐ and global‐economy price indices in calculating real prices. This ignores the high share of food in poor people's expenditures and the indirect effects of income growth on expenditure patterns of rich consumers. Poor consumers have not experienced the same falls in real food prices and are more vulnerable to price shocks. Different price indices must be developed to take account of differences between consumer groups.     

Towards a design of consumer durables

In the context of developing future technology options, a method is outlined to identify the mixes of attributes that consumers would be prepared to acquire and their relative importance. A way of assessing distance between consumers is proposed in terms of the importances of attributes, to cluster the consumers in terms of these distances, and to determine the attribute mixes that correspond to these clusters. The output is a consumer-oriented set of product options. An application to telecommunication services for a sample of organisations is used to illustrate the real-world relevance of the approach.     

THE CHALLENGE OF REVENUE SHARING WITH BUNDLED PRICING: AN APPLICATION TO MUSIC

Although bundling can substantially increase profits relative to standalone pricing, particularly for zero‐marginal‐cost information products, it has one major problem: bundling produces revenue that is not readily attributable to particular pieces of intellectual property, creating a revenue division problem. We evaluate several possible solutions using unique song valuation survey data. We find the Shapley value, a well‐motivated theoretical solution, is universally incentive compatible (all bundle elements fare better inside the bundle than under standalone pricing), but revenue‐sharing schemes feasible with readily available consumption data are not. Among feasible schemes, Ginsburgh and Zang's modified Shapley value performs best. (JEL C71, D79, L14)     

Role of motives and attributes in consumer motion picture choice

The study focuses on consumer motion picture motives and choice criteria. Its purpose can be specified into the following objectives: (1) to examine the motivational basis of cinema attending. (2) to examine the predictive ability of movie motives and consumers' attribute importances in preference regressions of four types of movie, (3) to carry out a motion picture choice analysis by predicting audience membership with discriminant analysis. The data is based on a convinience sample of Finnish consumers (N = 228) attending one of the following types of movie: adventures/ thrillers, human/ social dramas, sex movies, entertainment movies.The results of a group of multivariate analyses (factor analysis, canonical correlation, preference regression, and discriminant analysis) indicate that consumers attending different types of films have distinctly separate motivation bases, as well as attribute importance profiles, underlying their movie choices. Each movie type had a specific preference structure, expressed by the regression coefficients. Finally, the discriminant analysis suggests that the general motive and attribute variables are effective also in predicting motion picture choice. On balance, the results were mutually supportive and exemplify the managerial usefulness of quantitative consumer analysis also in the case of such abstract leisure products as motion pictures.     

Enabling informed consumer choice in the long-term care insurance market.

Provisions in the Health Insurance Portability and Accountability Act of 1996 (HIPAA) may increase private long-term care insurance sales without imposing substantially more stringent consumer-protection features. The ability of consumers to make informed choices when purchasing this complex product is examined in light of these changes. Data were collected through detailed examinations of policies and interviews with industry experts, insurance companies, agents, consumer groups, and regulators. Because of the complexity of this product, the goals of expanding, consumer choice and ensuring that consumers are able to make informed decisions often work against each other. Mechanisms are discussed through which the government can facilitate informed choice and improve consumer protection. The authors contend that, because the government is providing tax incentives that encourage consumers to purchase the product, it has the responsibility to ensure that consumers understand the long-term care insurance they purchase.     

RENT-SEEKING FIRMS, CONSUMER GROUPS, AND THE SOCIAL COSTS OF MONOPOLY

Do consumers' consumer-surplus (CS)–defending activities increase the social costs of monopoly compared to when consumers are inactive? Given just one rent-seeking firm, consumers ' CS-defending activities generally increase the social costs of monopoly, but given two or more rent-seeking firms, such activities generally reduce the social costs. (JEL D72, L12)     

Peer Support Among Consumers of Professional Mental Health Services

ABSTRACT

Peer-support services have become increasingly prevalent in mental health; consumers now deliver many services once provided by professional mental health providers. Recognizing this key asset in mental health consumers' service environment is critical for social workers. This exploratory study examines differences among 311 consumers of professional mental health services, half of whom also used peer-support services. The two groups (peer support compared with non-peer-support) were compared on a number of dimensions related to their utilization of and satisfaction with professional mental health services. Users of peer-support services perceived greater availability of professional services and used more professional services, but found professional services to be less useful than those not participating in peer support. No differences between the two groups were found for overall satisfaction with professional services. Findings related to policy, practice, and research are discussed.     

VERTICAL SEPARATION INCREASES GASOLINE PRICES

I examine the relationship between vertical separation and gasoline stations' prices and sales. The endogeneity of stations' organizational forms is addressed using both panel methods and an instrumental variables strategy. Controlling for the endogeneity of form, I find that vertical separation raises margins by 25%–45% but does not have a statistically significant impact on output. I interpret these results as suggesting that vertical separation induces local agents to exert effort in ways that increase consumers' demand. (JEL L14, L24, L81)     

Examining the joint impact of relationship norms and service failure severity on consumer responses

ABSTRACT

This study investigates consumers’ attitudinal and behavioral outcomes after service failure encounters with companies with which they have previously established good relationships. It indicates that conformity with or violation of relationship norms guides consumers’ decision making, and that their subsequent attitudinal and behavioral outcomes further depend on the severity of the service failure. Through a 2 (relationship norm types: exchange vs. communal) × 2 (service failure severity: minor vs. major) between-subjects experiment, the study shows that when the prior relationship norms are exchange-based, consumers demonstrate similar attitudes toward the minor and major failures. However, when these relationship norms are communally-based, consumers respond relatively positively in the minor failure situation, but they display more negative attitudes in the major failure situation. This study contributes to public relations literature regarding the role of company-consumer relationships in service failure situations.     

The influence of FDA advisory information and black box warnings on individual use of prescription antidepressants

We examine how use of antidepressant medications is influenced by Food and Drug Administration (FDA) warnings about the increased risk of suicidality associated with pediatric antidepressant use. With individual-level data on antidepressant use from the Medical Expenditure Panel Survey, we consider whether consumer responses to FDA warnings differ among targeted (children) and non-targeted (adult) age-groups. Because the warning labels specifically mentioned new users, we examine separately the effects of the warnings on initiations of antidepressant therapy and on continued use of antidepressants. We find evidence consistent with reduced initiation of antidepressant use among the intended population of children, and that usage among children with more highly educated parents responded earlier to FDA information. However, we also find spillover effects of reduced initiation among the non-targeted population of adults. Overall, our results indicate that the FDA warning may have led consumers to perceive risks beyond those specifically mentioned.     

Consumers' Online Information Search Behavior and the Phenomenon of Search vs. Experience Products

This study investigates consumers' importance evaluation and usage of the Internet as an information source, compared with other traditional information sources. The main issue is the extent to which experience products can be transformed so as to be searchable on the Internet. The results of a web-based survey showed that consumers of experience products tended to use more online information than those of search products. Online information sources from other consumers and neutral sources were perceived to be more important and were used more often by the consumers of experience products; whereas retailer/manufacturer websites were perceived to be more useful by consumers of search products. Perceived usefulness, perceived ease-of-use, market mavenism, and usage of offline information sources were also positively related to the usage of online information.     

The Adoption of Integrated Pest Management Practices Among Texas Cotton Growers1

Abstract Agricultural technologies are becoming increasingly complex requiring farmers to bundle selected technologies. Technology bundling results in a variety of different farming systems. Features of diffusion and farming systems theories are combined to define an analytical model, which assesses background, diffusion, and technology belief factors' influence on growers' adoption of integrated pest management (IPM) practices and cotton yields. We selected a proportionate random sample of growers (n = 722) from 14 cotton-producing counties in Texas. A telephone survey was conducted in 1985 resulting in a response rate of 76 percent. Findings demonstrated the importance of different sources of IPM information to particular status groups of growers. Information sources produced positive effects on growers' beliefs about IPM benefits and growers' adoption of three IPM practices. IPM adoption resulted in higher yields of upland and pima cotton per acre.     

Efficiency of consumer intertemporal choice under life cycle cost conditions

Many decisions made by consumers are intertemporal. Life cycle cost (LCC) conditions represent a specific type of intertemporal decisions, typically referring to items involving two cost components: present purchase price and future maintenance costs. This paper presents a conceptual framework for analyzing consumer LCC decision making. Within this framework the notion of choice efficiency is highlighted. The main contribution of the study is the direct estimation of consumers’ choice efficiency, as compared to previous studies that estimate only consumers’ implicit discount rates. Effects of situational and personal variables on efficiency of choice are estimated by means of a series of manipulated choice settings. The main empirical findings show situational effects of monetary size, type of object and time horizon. Additional findings show the effect of personal variables such as gender, marital status and education.     

ARE AUTOMOBILE SAFETY REGULATIONS WORTH THE PRICE: EVIDENCE FROM USED CAR MARKETS

The value consumers place on automobile safety regulations can be determined by examining the instantaneous effects changes in these regulations have on used vehicle prices. If consumers value safety regulations more than their cost, used vehicle prices decrease in response to a change in safety regulations. If consumers place at least some value on the safety induced by safety regulations, a change in emission control regulations will have a greater positive impact on used automobile prices than a change in safety regulations. Empirical results strongly support the latter case and, surprisingly, offer some support for the former case. (JEL L51, L62)     

INVESTIGATIONS CONCERNING THE DYNAMICS OF CONSUMER BEHAVIOR IN UNCERTAIN ENVIRONMENTS

This paper reports the results of several experiments investigating dynamic consumer behavior. When consumers know their incomes and prices but are uncertain about their preferences, we find that they typically adopt a two-step approach to locating optimal consumption bundles. Initially, a grid search method is employed; this is followed by a gradient search method. An interesting phenomenon observed in many of our experiments is a tendency to consume a bundle well away from the optimum, immediately after the optimum is located. The effects of income and price changes are also studied.     

Eyes on the account size: Interactions between attention and budget in consumer choice

The context surrounding a consumer decision, such as one’s overall budget available for purchases, can exert a strong effect on the subjective value of a product. Across three eye-tracking studies, we explore the attentional processes through which budget size influences consumers’ purchasing behavior. Higher budgets increased and sped up purchasing even when items were affordable at all budget sizes. Moreover, attention interacted with budget size to promote purchasing at higher budgets. Finally, individual differences in the magnitude of the budget effect related to attentional patterns: those whose decisions depended more on budget exhibited more budget-price transitions and less variability in search patterns compared to those whose decisions were less dependent on budget. These findings indicate that attention moderates the effect of budgets on purchasing decisions, allowing low budgets to serve as self-control devices and large budgets to generate impulse purchases.     

Scarcity and consumer choice behavior

Two experiments are performed to test hypotheses derived from commodity theory. Commodity theory promotes a psychological conceptualization of traditionally economic variables such as supply, demand and utility. The theory concerns itself mainly with the effect of restricted availability upon the valuation of communications, but in the present paper the effect of restricted availability and attainability on the preference for material goods (recipe books) is investigated.The first experiment was designed to test the effect of degree of availability (low, middle or high) and cause of unavailability (accidental unavailability, unavailability due to popularity, unavailability due to limited supply and unavailability due to both limited supply and popularity) on the choice between three recipe books in a simulated product test. The results suggest that the theory is valid only for attractive products. For subjects who were not attracted to the product this relationship was reversed (they avoided choosing the scarce product), indicating the arousal of an ‘altruism’ motive in the experimental setting.The second experiment was designed to test the effect of attainability (attainable, unattainable changed to attainable and unattainable) and cause of unattainability (accidental, popularity, limited supply and both limited supply and popularity) on the same kind of choice. The results again suggest that commodity theory is valid only for subjects attracted to the good, and only for the restricted attainability situation. For subjects not attracted to the product field no treatment effects were found. Commodity theory makes no clear prediction of the effects of unattainability, so reactance theory was used to predict the effects of this variable. The hypothesis that an unattainable good is valued more than an attainable good had to be rejected. A possible explanation based on the occurrence of frustration in this condition is discussed.