My research intererests are in
consumer behavior; some of the specific topics I enjoy are
» affective forecasting
» intertemporal choice
» decision making under risk and uncertainty
» prospect theory and loss aversion
» processes and memory in decision making
My dissertation is research is on affective forecasting in consumption decisions:
Seeing Into the Future: Consumers’ Predictions of Product Enjoyment (two studies run);
with Eric J. Johnson, adviser
The purchase decision can be modeled as a process of predicting the future pleasure a product will
produce for the decision maker. In order to make this prediction, the consumer makes a forecast of his
response to the consumption experience. We suggest a mechanism for how the predictions of future
emotional responses are generated in a consumer setting and how they affect the purchase decision.
Based on Construal Level Theory (Trope & Liberman, 2003) we expect the representation of future
consumption to be less concrete than current considerations. The processes used to tap the
representations also differ in prospect and retrospect, leading to
errors in affective forecasting. A major goal of this research is the
development of techniques which will improve affective forecasts in
consumption. A thorough understanding of the mechanisms involved would enable debiasing
interventions and improved consumer decision making.
Below are abstracts from some of my research projects that are under review or in progress.
The Silver Lining Effect: Formal Analysis and Experiment (Management Science, under
review); with Olivier Toubia and Eric J. Johnson
The silver lining effect predicts that segregating a small gain from a larger loss results in greater
psychological value than does integrating them into a smaller loss. Using a generic prospect theory
value function, we formalize this effect and derive conditions under which it should occur. We show
analytically that there exists a threshold such that segregation is optimal for gains smaller than this
threshold. The threshold is increasing in the size of the loss and decreasing in the degree of loss
aversion of the decision maker. Our formal analysis results in a set of hypotheses suggesting that the
silver lining effect is more likely to occur when: (i) the gain is smaller (for a given loss), (ii) the loss is
larger (for a given gain), (iii) the decision maker is less loss averse. We test and confirm these
predictions in a study of preferences for gambles, which we analyze in a hierarchical Bayesian
framework.
We are currently planning a follow-up study to this, where we apply the
findings from the first paper to a consumer setting. Segregation of
gains and losses will be implemented using separation of an instant
rebate from the base price. In addition, the degree to which we find
the silver lining effect 'in the field,' may be dependent on the extent
to which the decision maker pays attention to different sources of
information in the decision environment, and so we plan on using
MouseLabWeb in order to track information acqusition patterns.
Why Remembering Matters: The Effect of Retrieval Induced Forgetting (rif) on the
Valuation of Consumer Goods (two studies run); with Eric Johnson
The phenomenon of rif means that, paradoxically, remembering one thing from a category can make
it harder to remember the other things from that same category. We suggest that if people use their
memories to search for categorized information when they’re making valuations of consumer goods,
rif will affect those valuations. Depending on how information is categorized, and the order of its
recall, valuations can be increased, decreased, or left unchanged. By cuing the information to be
retrieved from memory, the valuations can be manipulated experimentally.
Elicitation of Prospect Theory Parameters with Bayesian Estimation (some data collected,
modeling/estimation in progress)
In order to fully utilize behaviorally informed models of economic behavior, such as Prospect Theory,
individual-level estimates of model parameters are necessary. Reliably eliciting and estimating these
may present experimental problems, however, as participants’ available time attention are constrained.
Modifying and extending the method of Fox et al. (2007), our elicitation procedure requires only
sixteen accept/reject responses to gambles while estimating both loss aversion and sensitivity
parameters, making it well-suited to online experimental applications. Bayesian methods are used to
reduce the number of observations needed to get useful individual-level parameter estimates.
Savoring: Anticipatory Utility and Psychological Distance (one study run)
Loewenstein (1987) showed that decision makers may sometimes choose to wait for desirable outcomes, rather than receiving them immediately, displaying reverse time discounting. What the antecedents of this phenomenon are is however still largely unclear. We suggest an explanation based on Construal Level Theory (Trope & Liberman, 2003), which also accommodates previous work on patience and self-control (e.g. Mischel & Metcalfe, 1999). We hypothesize a curvilinear relationship between ‘savorability’ and psychological distance, such that below an optimal distance impatience rules out savoring, while above it the outcome fails to elicit the necessary desire that makes anticipation pleasurable.
