Search the Site

Posts Tagged ‘Consumer Preferences’

The Midol Monopolist

A student writes that she became a monopolist in her freshman dorm — hoarding Midol to sell to her dorm-mates at the time each month when dorm-mate had a quite inelastic demand for this product. She also realized that at that time, there is an increasingly inelastic demand for chocolate-chip cookies, so she hoarded and sold those, too. She correctly notes that the two goods are complementary over time — more of both consumed on some days than on others. But I bet that over a short interval, they are substitutes — the satisfaction from one reduces the demand for the other. This illustrates how we need to think about the time dimension of consumer choice. I would also bet that her monopoly doesn’t last long. Anybody can bring the two products to the dorm and sell them — there are few barriers to entry. A better description is that she’s an innovating entrepreneur in what inherently will be a competitive industry.

(HT: A.S.)


Should You Ignore the Weather When Buying a New House or Car?

An NBER working paper (full PDF here) by Meghan R. Busse, Devin G. Pope, Jaren C. Pope, and Jorge Silva-Risso explores the role of projection bias when choosing a new car or house. It turns out that weather conditions are a huge factor when consumers are debating big purchases like houses or cars. The abstract:

Projection bias is the tendency to overpredict the degree to which one’s future tastes will resemble one’s current tastes. We test for evidence of projection bias in two of the largest and most important consumer markets – the car and housing markets. Using data for more than forty million vehicle transactions and four million housing purchases, we explore the impact of the weather on purchasing decisions. We find that the choice to purchase a convertible, a 4-wheel drive, or a vehicle that is black in color is highly dependent on the weather at the time of purchase in a way that is inconsistent with classical utility theory. Similarly, we find that the hedonic value that a swimming pool and that central air add to a house is higher when the house goes under contract in the summertime compared to the wintertime.


The Appeal of the Middle

New research (summarized by the BPS Research Digest) from Paul Rodway, Astrid Schepman, and Jordana Lambert demonstrates that people seem to prefer items located in the middle:

“In replication of the centre-stage effect, it was found that when participants were presented with a line of five pictures, they preferred pictures in the centre rather than at either end,” the authors write. “This applies when the line of pictures was arranged horizontally or vertically and when participants selected from five pairs of identical socks arranged vertically.”  

The authors also discuss the policy implications of their work:

“If item location influences preference during the millions of purchasing choices that occur every day, it will be exerting a substantial influence on consumer behaviour. Moreover, choices from a range of options are made in many other contexts (e.g. legal and occupational), and it remains to be investigated whether the central preference remains with other formats and whether it extends to other types of decision.”


Does Reviewer Quality Matter?

You can buy almost anything online these days — hotel reservations, books, movies, etc. — but how much does reviewer quality matter to online shoppers? A lot, according to research from Anindya Ghose and Panagiotis G. Ipeirotis. In a previous paper, the pair noticed that “demand for a hotel increases if the online reviews on TripAdvisor and Travelocity are well-written, without spelling errors; this holds no matter if the review is positive or negative.” In a more recent paper, Ghose and Ipeirotis find similar trends for products on Amazon.com.


The Art of Online Recommendations

Wired profiles Hunch, a company trying to master the art of online recommendations. Hunch participants respond to “Teach Hunch About You” questions, and their answers are fed into a master algorithm, which has already revealed some interesting correlations.


Sorbet Selection

For several years our local grocery story carried a brand of coconut sorbet, Ciao Bella, which we had for dessert several times a week. It was $5 per pint-pretty expensive-but worth much more than every penny. In the last month it hasn’t been on the store’s shelves. The manager informs me that they will not be stocking it…


Hands-Free Shopping

If Adam Smith were alive today, he might rely on InvisibleHand for his online shopping. The service, a Firefox add-on, notifies users if a product is available for less elsewhere, eliminating the need for price-comparison websites. The invisible hand never worked so quickly.


Give Me Your Odd Pairs

I love to collect examples of bizarre pairs of goods that sellers or buyers apparently believe are complements or substitutes.


Shoe Gazing

| Zappos created a map on its site showing, in real-time, orders being placed for its shoes across the U.S. Other than hypnotizing Zappos employees and allowing New Yorkers to see for themselves whether they have better fashion sense than the rest of the country, is the map doing anything to help Zappos sell more shoes? As people embrace thrift . . .


What Else Acts Like Cheap Wine and Cigarettes?

Denis Defreyne It’s interesting to see how people’s spending patterns respond to a (presumably) temporary decline in income during the recession. Which items are more or less income-elastic in the short run? A pediatrician friend of ours mentions that he is seeing less business; when there are three kids with coughs, for example, a parent will bring in one, get . . .


A Beet Paradox

Photo: Darwin Bell Beets are the new broccoli. Or at least they will be after Obama takes office on January 20, as the president-elect recently revealed his distaste for this vitamin-laden root vegetable. And Obama is not alone: Even as beet salads have become popular in trendy eateries, most American kids I know also reject the mighty beet. It’s a . . .


FREAK-TV: An Economic History of … Abs?

Video Today’s installment of FREAK-TV traces the history of male abs in culture and media, from the unveiling of Michelangelo’s “David” to James Dean‘s shirtless pose in Rebel Without a Cause to the Calvin Klein abs bonanza of the 1990s that made “six-packs” the norm (and turned an often-unattainable level of fitness into an anti-fat craze that continues today). Now . . .


EULA Wars: The Customer Is Always Right … to Lodge a Protest

Here’s another good post from our new guest blogger Ian Ayres; here are some previous Ayres items. My friend and Peabody Award-winning journalist Jack Hitt is irked by EULAs (End User Licensing Agreements). They are the ubiquitous terms and conditions on the Web that no one ever reads. Jack can’t understand why, if he has to accept a seller’s EULA . . .


FREAK-TV: Ill-Conceived Promotional Merchandise

Video It is important to never underestimate the power of free — of free anything, it seems. I have been to conferences where the typical attendee makes at least low six figures and yet is willing to stand in line to get his schwag bag. What’s in it? Some suntan lotion, a paperweight, boutique vinegar — it doesn’t really matter. . . .


E. Coli Advertising Campaign?

Evidence that any publicity can be good publicity: Reading this story about an E. coli outbreak in the pepperoni on Totino’s pizzas reminded me of my 20-year love affair with Totino’s. Why haven’t I been eating them lately? I will have to get some immediately. Maybe I’ll start with the sausage pizza, though.


Maybe This Guy Should Be Running Delta Air Lines

I recently blogged about a suboptimal customer service experience with Delta Air Lines. (As a couple of commenters pointed out — see Nos. 28, 36, and 44 — one of my assumptions was probably wrong, but that doesn’t change the thrust of the story very much.) So it’s nice to report a really good customer service experience. We recently had . . .


Salvation for a Chronically Late Adopter

Two weeks ago, I blogged about my inability to recognize how new technologies would change my life for the better. I typically wait years to adopt things, then do so grudgingly, only to find within days that I don’t know how I ever lived without them. I asked our readers to offer suggestions about my next life-changing technology. The enticement: . . .


Here’s Why Richard Branson Should Be Delta Airlines’ Biggest Fan

Last week, Passenger X arrived at the Orlando airport with a first-class e-ticket for New York City. At the airport, the ticket machine spat out a boarding pass for a seat in the back of coach. Why? The plane, he was told, had been “downsized” from a large jet to a smaller one. There was no first-class section on the . . .


Should Apple Burn Its Economics Textbooks?

If you ask an economist how to price a new product that is just being introduced, the response you will get is that you should charge a very high price at first and then steadily reduce that price over time. There are two reasons for doing this. First, it generally gets cheaper to produce things over time, so it makes . . .


Diet Coke is 99% Water (And That Is Now a Good Thing)

Back in the day, when people noted that Diet Coke was 99% water, it was an insult. The point was that water was free, and Diet Coke was just free water plus a little bit of artificial this and that — so you would have to be a fool to pay so much for it. Of course, times have changed. . . .


More From the “Economic Naturalist” Robert Frank

We recently posted a series of excerpts from The Economic Naturalist, a new book by the Cornell economist Robert Frank (who has another new book out this week, Falling Behind, a brief treatise on income inequality). Because the Economic Naturalist excerpts were well received and vigorously debated, we asked Frank if he would reply to some of the feedback. Kindly, . . .


The FREAKest Links: iPhones May Be Hazardous to your Health Edition

Via Marginal Revolution: In his quest to explain the male-female wage gap in business, academia, and other fields, the economist M. Daniele Paserman studied the role that gender plays in competitive environments. Where’d he get his data? From professional tennis matches. Paserman argues that male athletes are generally more adept at handling high-pressure situations. With iPhone frenzy reaching a peak, . . .


No Price Discrimination at Northwest Airlines

I recently flew business class on Northwest Airlines. When it came time for dinner to be served, I decided I would decline dinner for three reasons: 1. I had eaten just a few hours earlier. 2. I was busy working and I didn’t want to put away all the papers I had spread out on my tray. 3. I caught . . .


The FREAKest Links: Polite Americans and Spend-Happy Teens Edition

From Reuters, via the New Zealand Herald: Contrary to the notion that American tourists are obnoxious, a survey of 15,000 European hoteliers found that Americans ranked second, behind the Japanese, as the world’s politest and most preferable guests. This may have to do, of course, with our great fondness for tipping. Britons, meanwhile, were rated the fifth worst tourists, due . . .


The Rise of the Black Book Club

Given that the publishing industry has a tendency to flail when it comes to marketing research, here’s a heartening consumer trend: The Wall Street Journal has reported that book clubs targeting African-American readers have exploded in popularity, even while traditional book clubs are foundering. As of December, the Black Expressions book club had 460,000 members, a substantial rise over the . . .


Customer Service Heaven

From a recent N.Y. Times article by Michael Barbaro, headlined “Less Risk Seen in Purchasing Clothes Online”: For the first time since online retailing was born a decade ago, the sales of clothing have overtaken those of computer hardware and software, suggesting that consumers have reached a new level of comfort buying merchandise on the Web. One of the merchants . . .


Why Is There No All-Business-Class Jet Service Within the U.S.?

I was in Canada much of last week, and happened to run into an off-duty Air Canada pilot. I had flown Air Canada a few times in the previous days, and told him that the experience was significantly better than on any U.S. airline. He grimaced. “Oh, it’s terrible for us, too,” he said. Then he talked about all the . . .


Experimenting with milkshakes?

I have been on a mission to convince firms to do simple experiments that will give them feedback regarding the decisions that they make. Just as with people (as Anders Ericsson studies), firms cannot learn without feedback. It turns out, however, that it is not easy for people in companies to see the wisdom in experiments. Which is why I . . .


Freakonomics in the Times Magazine: Gift-Card Economy

In their Jan. 7, 2007, column for the New York Times Magazine, Dubner and Levitt ask the question we’ve all been asking: What do a gym membership, a bottle of prescription pills, and a holiday gift card have in common? This blog post supplies additional research material.


A Bunch of Books We Like

Amazon.com asked us to compile of list of good economics books (well, books that are at least loosely concerned with economics), and since we’re often asked that same question by our readers, I’ll go ahead and post the Amazon link here.