Using survival prediction techniques to learn consumer-specific reservation price distributions

A consumer’s “reservation price” (RP) is the highest price that s/he is willing to pay for one unit of a specified product or service. It is an essential concept in many applications, including personalized pricing, auction and negotiation. While consumers will not volunteer their RPs, we may be able to predict these values, based on each consumer’s specific information, using a model learned from earlier consumer transactions. Here, we view each such (non)transaction as a censored observation, which motivates us to use techniques from survival analysis/prediction, to produce models that can generate a consumer-specific RP distribution, based on features of each new consumer. To validate this framework of RP, we run experiments on realistic data, with four survival prediction methods. These models performed very well (under three different criteria) on the task of estimating consumer-specific RP distributions, which shows that our RP framework can be effective

Preference Dynamics in Sequential Consumer Choice with Defaults

This research examines the impact of defaults on product choice in sequential-decision settings. Whereas prior research has shown that a default can affect what consumers purchase by promoting choice of the preselected option, the influence of defaults is more nuanced when consumers make a series of related choices. In such a setting, consumer preferences may evolve across choices due to “spillover” effects from one choice to subsequent choices. The authors hypothesize that defaults systematically attenuate choice spillover effects because accepting a default is a more passive process than either choosing a nondefault option in the presence of a default or making a choice in the absence of a default. Three experiments and a field study provide compelling evidence for such default-induced changes in choice spillover effects. The findings show that firms’ setting of high-price defaults with the aim of

Economics, Psychology, and Social Dynamics of Consumer Bidding in Auctions

With increasing numbers of consumers in auction marketplaces, we highlight some recent approaches that bring additional economic, social, and psychological factors to bear on existing economic theory to better understand and explain consumers' behavior in auctions. We also highlight specific research streams that could contribute towards enriching existing economic models of bidding behavior in emerging market mechanisms.Peer Reviewedhttp://deepblue.lib.umich.edu/bitstream/2027.42/47034/1/11002_2005_Article_5901.pd

Numeric Fluency and Preference

We show that people prefer choice alternatives that are comprised of round numbers, and that this preference arises from the greater processing fluency associated with such alternatives. When choosing between comparable gambles, participants were more likely to choose the prospect comprised of round numbers whether or not it was riskier, more or less arithmetically complex, and whether or not they were provided with its expected value. Critically, the presence of even a single round number is sufficient to enhance preference. The effect of numeric fluency on choice is shown in within-subject comparisons, indicating internally inconsistent risk preferences

A Human Capital Perspective of Skill Acquisition and Interface Loyalty

There are many arts among men, the knowledge of which is acquired bit by bit by experience. For it is experience that causeth our life to move forward by the skill we acquire, while want of experience subjects us to the effects of chance. Plato To most men experience is like the stern lights of a ship, which illuminates only the track it has passed. Samuel Taylor Coleridge It has long been recognized that humans are able to improve task performance as a result of repeated experience with a particular task, and that this type of learning consistently adheres to the Power Law of Practice. However, less attention has been given to the impact that practice, and the acquisition of skill, have on a user’s loyalty to a particular software interface. Here, we review the notion of human capital, and discuss specific examples from research into online shopping, in an effort to better understand the role of learning in the development of interface loyalty. Learning by doing is an essential aspect of human knowledge acquisition. Ove