Lit Up or Dimmed Down? Why, When, and How Regret Anticipation Affects Consumers’ Use of the Global Brand Halo

Research has long established the existence of a global brand halo that benefits global brands by triggering “global equals better” inferences by consumers. Nevertheless, little is known about the conditions under which this halo may or may not be used or about whether and, if so, how it can situationally fade. Drawing from regret theory, the authors posit that anticipating regret can conditionally both attenuate and accentuate consumers’ use of the global brand halo and develop a serial conditional process model to explain the mechanism underlying regret’s influence. The results of two experimental studies show that anticipated regret affects global brand halo use—and subsequently relative preference for global or local brands—by increasing consumers’ need to justify their purchase decision. Whether and how consumers will use the global brand halo depends on consumers’ product category schema, while the intensity of the halo’s use depends on consumers’ maximization tendency. The findings offer a decision-theory perspective on the competition between global and local brands and empirically based advice on managerial interventions that can influence global or local brand market shares

The Public Management of Risk: Separating Ex Ante and Ex Post Monitors

When a firm undertakes risky activities, the conflict between social and private incentives to implement safety care requires public intervention which can take the form of both monetary incentives but also ex ante or ex post monitoring, i.e., before or after an accident occurs. We delineate the optimal scope of monitoring depending on whether public monitors are benevolent or corruptible. We show that separating the ex ante and the ex post monitors increases the likelihood of ex post investigation, helps prevent capture and improves welfare.Risk Regulation, Monitoring, Capture, Integration, Separation

THE INFLUENCE OF AFFECT ON PRODUCT EVALUATIONS AND ENDURING CONSUMPTION ENJOYMENT

This dissertation consists of two essays on the influence of affect on consumer intentions and behavioral responses. In the first essay, the influence of negative affect on consumer satiation is investigated. In the second essay, the influence of conceptual fluency, a positive affective response of “feeling right” during advertising evaluations, evoked by the structural properties of memory networks, is identified. In the first essay, how anticipated consumption variety influences consumers’ affective responses to slow satiation in the present is investigated. Prior research has focused on how cognitive appraisals of present variety influence consumers’ satiation rates. However, in addition to cognitively attending to the present, consumers also generate affective information regarding future consumption events (e.g. thinking about dessert while eating an entrée). Results indicate that more anticipated consumption variety reduces the amount of negative affect consumers experience during recurrent consumption, which is found to extend consumers’ present consumption enjoyment (reduced satiation rates). Further, the moderating roles of vice and virtue product perceptions and consumer emotional intelligence are also investigated, providing additional evidence of the proposed affective process mechanism while identifying boundary conditions for the effect. In the second essay, how the structural nature of semantic memory can produce affective responses, in the form of conceptual fluency, to influence consumers’ product behavioral intentions is investigated. Memory activations, generated by key words in advertising, can provide a temporary boost to the perceived desirability of a given product. However, memories are not activated in isolation. Rather, an entire network of interrelated concepts is activated along with the focal memory through various learned associations. Despite a great deal of knowledge detailing the phenomena of memory spreading activations, research has primarily focused on which memories are connected to each other, rather than on how activated memories are connected to their surrounding networks. This essay identifies consumers’ responses to the betweenness centrality (e.g. providing mediated access to other concepts in memory via the shortest path) of a focal word in advertising, rather than the activation of specific associations, as critical for advertising success

Mind the Gap! Consumer Perceptions and Choices of Medicare Part D Prescription Drug Plans

Medicare Part D provides prescription drug coverage through Medicare approved plans offered by private insurance companies and HMOs. In this paper, we study the role of current prescription drug use and health risks, related expectations, and subjective factors in the demand for prescription drug insurance. To characterize rational behavior in the complex Part D environment, we develop an intertemporal optimization model of enrollment decisions. We generally find that seniors' choices respond to the incentives provided by their own health status and the market environment as predicted by the optimization model. The proportion of individuals who do not attain the optimal choice is small, but the margin for error is also small since enrollment is transparently optimal for most eligible seniors. Further, there is also evidence that seniors over-react to some salient features of the choice situation, do not take full account of the future benefit and cost consequences of their decisions, or the expected net benefits and risk properties of alternative plans.

On the robustness of learning in games with stochastically perturbed payoff observations

Motivated by the scarcity of accurate payoff feedback in practical applications of game theory, we examine a class of learning dynamics where players adjust their choices based on past payoff observations that are subject to noise and random disturbances. First, in the single-player case (corresponding to an agent trying to adapt to an arbitrarily changing environment), we show that the stochastic dynamics under study lead to no regret almost surely, irrespective of the noise level in the player's observations. In the multi-player case, we find that dominated strategies become extinct and we show that strict Nash equilibria are stochastically stable and attracting; conversely, if a state is stable or attracting with positive probability, then it is a Nash equilibrium. Finally, we provide an averaging principle for 2-player games, and we show that in zero-sum games with an interior equilibrium, time averages converge to Nash equilibrium for any noise level.Comment: 36 pages, 4 figure

Efficiency loss in market mechanisms for resource allocation

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Electrical Engineering and Computer Science, 2004.Includes bibliographical references (p. 237-249).This electronic version was submitted by the student author. The certified thesis is available in the Institute Archives and Special Collections.This thesis addresses a problem at the nexus of engineering, computer science, and economics: in large scale, decentralized systems, how can we efficiently allocate scarce resources among competing interests? On one hand, constraints are imposed on the system designer by the inherent architecture of any large scale system. These constraints are counterbalanced by the need to design mechanisms that efficiently allocate resources, even when the system is being used by participants who have only their own best interests at stake. We consider the design of resource allocation mechanisms in such environments. The analytic approach we pursue is characterized by four salient features. First, the monetary value of resource allocation is measured by the aggregate surplus (aggregate utility less aggregate cost) achieved at a given allocation. An efficient allocation is one which maximizes aggregate surplus. Second, we focus on market-clearing mechanisms, which set a single price to ensure demand equals supply. Third, all the mechanisms we consider ensure a fully efficient allocation if market participants do not anticipate the effects of their actions on market-clearing prices. Finally, when market participants are price anticipating, full efficiency is generally not achieved, and we quantify the efficiency loss. We make two main contributions. First, for three economic environments, we consider specific market mechanisms and exactly quantify the efficiency loss in these environments when market participants are price anticipating. The first two environments address settings where multiple consumers compete to acquire a share of a resource in either fixed or elastic supply; these models are motivated by resource allocation in communication(cont.) networks. The third environment addresses competition between multiple producers to satisfy an inelastic demand; this model is motivated by market design in power systems. Our second contribution is to establish that, under reasonable conditions, the mechanisms we consider minimize efficiency loss when market participants anticipate the effects of their actions on market-clearing prices. Formally, we show that in a class of market-clearing mechanisms satisfying certain simple mathematical assumptions and for which there exist fully efficient competitive equilibria, the mechanisms we consider uniquely minimize efficiency loss when market participants are price anticipating.by Ramesh Johari.Ph.D