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We investigate the impact of employer matching contributions on leakage at job termination.

Over the past several decades, scholars have highlighted the obligations and opportunities for marketing as a discipline to play a role in creating a better world — or risk becoming irrelevant for the largest problems facing consumers and society. Climate change, poverty, obesity, discrimination and bias, and the Covid-19 pandemic have demonstrated that marketing (and businesses) cannot operate in isolation from the broader community. We seek to provide a framework for authors and reviewers to enhance the rigor and relevance of research in marketing that not only contributes new knowledge to science, but also makes a positive difference in the world. In doing so, we hope to encourage further consideration of the role of marketing scholarship in providing a novel lens into potential solutions for societal concerns.

The field of marketing has made significant strides over the past 50 years in understanding how methodological choices affect the validity of conclusions drawn from our research. This paper highlights some of these and is organized as follows: We first summarize essential concepts about measurement and the role of cumulating knowledge, then highlight data and analysis methods in terms of their past, present, and future. Lastly, we provide specific examples of the evolution of work on segmentation and brand equity. With relatively well-established methods for measuring constructs, analysis methods have evolved substantially. There have been significant changes in what is seen as the best way to analyze individual studies as well as accumulate knowledge across them via meta-analysis. Collaborations between academia and business can move marketing research forward. These will require the tradeoffs between model prediction and interpretation, and a balance between large-scale use of data and privacy concerns.

Purpose Intercultural competence has been found to be increasingly important. The purpose of this paper is to understand how intercultural competence impacts service providers’ ability to recognition faces of both black and white consumers. Design/methodology/approach Two experiments were administered to understand how intercultural competence impacts recognition of black and white consumer faces. Findings The authors find that the more intercultural competence that respondents report with blacks, the better they are at distinguishing between black regular customers and black new shoppers in an experiment. The authors find no impact of intercultural competence on the ability of respondents to differentiate between white consumers. These findings hold for respondents in the USA and South Africa. Research limitations/implications One limitation of this research is that the studies were conducted in a controlled lab setting. Thus, one could imagine additional noise from a true consumer setting might increase the effects of these results. Another limitation is the focus on only black and white consumer faces. In this paper, the authors focused on these two races, specifically to keep the factorial design as simplified as possible. Originality/value The implications of this research are important given that the ability of employees’ recognizing customer faces can affect customers’ day-to-day interactions in the marketplace.

Though perceived financial well-being is viewed as an important topic of consumer research, the literature contains no accepted definition of this construct. Further, there has been little systematic examination of how perceived financial well-being may affect overall well-being. Using consumer financial narratives, several large-scale surveys, and two experiments, we conceptualize perceived financial well-being as two related but separate constructs: 1) stress related to the management of money today (current money management stress), and 2) a sense of security in one’s financial future (expected future financial security). We develop and validate measures of these constructs (web appendix A) and then demonstrate their relationship to overall well-being, controlling for other life domains and objective measures of the financial domain. Our findings demonstrate that perceived financial well-being is a key predictor of overall well-being and comparable in magnitude to the combined effect of other life domains (job satisfaction, physical health assessment, and relationship support satisfaction). Further, the relative importance of current money management stress to overall well-being varies by income groups and due to the differing antecedents of current money management stress and expected future financial security. Implications for financial well-being and education efforts are offered.

Many consumers suffer from low levels of financial literacy, and attempts to increase this dimension of consumer expertise via educational interventions are typically unsuccessful. We propose that many of these apparent deficits in literacy and learning may be caused by a cognitively efficient distribution of responsibility for knowledge and decision-making in different domains between relationship partners. New relationship partners adopt specialized domains of responsibility quickly and intuitively in a process guided more by circumstantial factors than by matching tasks with aptitudes (study 1). Cross-sectional data from consumers in long-term relationships provide evidence that distributions of responsibility for financial decision-making between partners may give rise to differences in financial literacy, such that the financial specialist develops expertise in this area while the non-specialist does not (study 3). This ever-growing gap in financial literacy is generally unrecognized by consumers (studies 2, 4), despite being linked to corresponding differences in both financial decision-making (studies 5, 6) and financial information search (study 6). Consumers seem to develop expertise on a “need to know” basis. We argue that offloading responsibility to a relationship partner may eliminate this need in the present, while simultaneously creating barriers to developing expertise if and when it is needed in the future.

Low incomes, limited financial literacy, fraud, and deception are just a few of the many intractable economic and social factors that contribute to the financial difficulties that households face today. Addressing these issues directly is difficult and costly. But poor financial outcomes also result from systematic psychological tendencies, including imperfect optimization, biased judgments and preferences, and susceptibility to influence by the actions and opinions of others. Some of these psychological tendencies and the problems they cause may be countered by policies and interventions that are both low cost and scalable. We detail the ways that these behavioral factors contribute to consumers' financial mistakes and suggest a set of interventions that the federal government, in its dual roles as regulator and employer, could feasibly test or implement to improve household financial outcomes in a variety of domains: retirement, short-term savings, debt management, the take-up of government benefits, and tax optimization.

Consumer research often fails to have broad impact on members of the marketing discipline, on adjacent disciplines studying related phenomena, and on relevant stakeholders who stand to benefit from the knowledge created by rigorous research. The authors propose that impact is limited because consumer researchers have adhered to a set of implicit boundaries or defaults regarding what consumer researchers study, why they study it, and how they do so. The authors identify these boundaries and describe how they can be challenged. By detailing five impactful articles and identifying others, they show that boundary-breaking, marketing-relevant consumer research can influence relevant stakeholders including academics in marketing and allied disciplines as well as a wide range of marketplace actors (e.g., business practitioners, policy makers, the media, society). Drawing on these articles, the authors articulate what researchers can do to break boundaries and enhance the impact of their research. They also indicate why engaging in boundary-breaking work and enhancing the breadth of marketing’s influence is good for both individual researchers and the fields of consumer research and marketing.

The US government imposes a 10% penalty to discourage pre-retirement leakage—cash withdrawal from 401(k) retirement savings before the age of 59.5. In our unique data set with 162,360 terminated employees covered by 28 retirement plans, 41.4% of employees leaked by cashing out 401(k) savings at job separation. We investigate the impact of employer matching contributions on leakage at job termination. Increasing the generosity of the employer/employee match rate increases retirement balances, reducing leakage. It also increases the proportion of one’s balance contributed by the employer, increasing leakage. We interpret the latter effect as showing that employees are more likely to frame their retirement accounts as a rainy-day fund rather than a lockbox of untouchable retirement savings when their employer contributes a greater proportion of the balance. We estimate that a 50% increase in employer/employee match rate increases leakage probability by 6.3% at job termination. However, there could be a 35.3% reduction in leakage probability if employees ignore the perceived incentive generated by the framing effect. Approximately 60% of accumulated assets from a 50% increase in match rate leak out of the system due to framing bias attributable to the percentage of assets contributed by the employer.

We replicate and extend the work of Degeratu, Rangaswami, and Wu (2000) and Danaher, Wilson, and Davis (2003). Using econometric analyses of purchase behavior, both studies found a larger role of brands in purchases in online versus offline shopping environments. We use two controlled randomized experiments, eliminating certain alternative explanations for the prior findings, replicating those findings when offline shopping included sensory information, and showing the psychological mechanism for why familiar brands have a greater relative advantage online than offline. In a third experiment, we tried and failed to reverse the effect by using diagnostic online reviews.

This article examines how consumers forecast their future spare money, or “financial slack.” Although consumers generally think that both their income and expenses will rise in the future, they underweight the extent to which their expected expenses will cut into their spare money, a phenomenon the authors term “expense neglect.” The authors test and rule out several possible explanations for this phenomenon and conclude that expense neglect is due in part to insufficient attention toward expectations about future expenses relative to future income. “Tightwad” consumers, who are chronically attuned to costs, show less severe expense neglect than “spendthrifts,” who are less attuned to costs. The authors further find that expectations regarding changes in income (and not changes in expenses) predict responses to the Michigan Index of Consumer Sentiment, a leading macroeconomic indicator. Finally, the authors conduct a meta-analysis of their entire file drawer (27 studies, 8,418 participants) and find that (1) across studies, participants place 2.9 times greater weight on income change than they do on expense change when forecasting changes in their financial slack, and (2) expense neglect is stronger for distant than for near-future forecasts.

This special issue is devoted to exploring new methods for addressing questions in strategic management. This introduction synthesizes the collective contribution of the articles for strategy research. The articles draw on methods from other fields, extending and adapting them to address strategy questions. The innovations provide new, different, or more nuanced measures and findings as compared to prior research. We conclude by discussing more general implications for scholarship in strategic management. Copyright © 2015 John Wiley & Sons, Ltd.

We contrast the philosophy guiding the Replication Corner at IJRM with replication efforts in psychology. Psychology has promoted “exact” or “direct” replications, reflecting an interest in statistical conclusion validity of the original findings. Implicitly, this philosophy treats non-replication as evidence that the original finding is not “real” — a conclusion that we believe is unwarranted. In contrast, we have encouraged “conceptual replications” (replicating at the construct level but with different operationalization) and “replications with extensions”, reflecting our interest in providing evidence on the external validity and generalizability of published findings. In particular, our belief is that this replication philosophy allows for both replication and the creation of new knowledge. We express our views about why we believe our approach is more constructive, and describe lessons learned in the three years we have been involved in editing the IJRM Replication Corner. Of our thirty published conceptual replications, most found results replicating the original findings, sometimes identifying moderators.

Considerable prior statistical work has criticized replacing a continuously measured variable in a general linear model with a dichotomy based on a median split of that variable. Iacobucci, Posovac, Kardes, Schneider, and Popovich (2015-in this issue) defend the practice of “median splits” using both conceptual arguments and simulations. We dispute their conceptual arguments, and we have identified technical errors in their simulations that dramatically change the conclusions that follow from those simulations. We show that there are no real benefits to median splits, and there are real costs in increases in Type II errors through loss of power and increases in Type I errors through false–positive consumer psychology. We conclude that median splits remain a bad idea.

Mission Creep, Mission Impossible, or Mission of Honor? Consumer Behavior BDT Research in an Internet Age

There is no worse time to be interrupted than right now. Being close to attaining a goal to complete a focal task increases the attractiveness of that task compared to an interrupting task (study 1), makes people less willing to take on some otherwise attractive interruption than if they were farther away from completion (studies 2, 3, and 4), and causes them to perceive that in that moment they have little spare time (studies 3 and 4). Consumers immersed in goal pursuit are affected by local progress on an individual subgoal that supports an overarching goal even if this has no effect on the timing of attaining the overarching goal. Observers do not appreciate the motivating power of proximity to completing subgoals, and this leads them to mispredict the behavior of others (study 5).

Policy makers have embraced financial education as a necessary antidote to the increasing complexity of consumers' financial decisions over the last generation. We conduct a meta-analysis of the relationship of financial literacy and of financial education to financial behaviors in 168 papers covering 201 prior studies. We find that interventions to improve financial literacy explain only 0.1% of the variance in financial behaviors studied, with weaker effects in low-income samples. Like other education, financial education decays over time; even large interventions with many hours of instruction have negligible effects on behavior 20 months or more from the time of intervention. Correlational studies that measure financial literacy find stronger associations with financial behaviors. We conduct three empirical studies, and we find that the partial effects of financial literacy diminish dramatically when one controls for psychological traits that have been omitted in prior research or when one uses an instrument for financial literacy to control for omitted variables. Financial education as studied to date has serious limitations that have been masked by the apparently larger effects in correlational studies. We envisage a reduced role for financial education that is not elaborated or acted upon soon afterward. We suggest a real but narrower role for “just-in-time” financial education tied to specific behaviors it intends to help. We conclude with a discussion of the characteristics of behaviors that might affect the policy maker's mix of financial education, choice architecture, and regulation as tools to help consumer financial behavior. This paper was accepted by Uri Gneezy, behavioral economics.

It is common for researchers discovering a significant interaction of a measured variable X with a manipulated variable Z to examine simple effects of Z at different levels of X. These “spotlight” tests are often misunderstood even in the simplest cases, and it appears that consumer researchers are unsure how to extend them to more complex designs. The authors explain the general principles of spotlight tests, show that they rely on familiar regression techniques, and provide a tutorial demonstrating how to apply these tests across an array of experimental designs. Rather than following the common practice of reporting spotlight tests at one standard deviation above and below the mean of X, it is recommended that when X has focal values, researchers should report spotlight tests at those focal values. When X does not have focal values, it is recommended that researchers report ranges of significance using a version of Johnson and Neyman's test the authors term a “floodlight.”

The modal scientific approach in consumer research is to deduce hypotheses from existing theory about relationships between theoretic constructs, test those relationships experimentally, and then show “process” evidence via moderation and mediation. This approach has its advantages, but other styles of research also have much to offer. We distinguish among alternative research styles in terms of their philosophical orientation (theory-driven vs. phenomenon-driven) and their intended contribution (understanding a substantive phenomenon vs. building or expanding theory). Our basic premise is that authors who deviate from the dominant paradigm are hindered by reviewers who apply an unvarying set of evaluative criteria. We discuss the merits of different styles of research and suggest appropriate evaluative criteria for each.

International audience; La procédure de Baron et Kenny pour déterminer si une variable indépendante affecte une variable dépendante à travers une médiatrice est si connue qu'elle est utilisée par les auteurs et requise par les relecteurs quasi systématiquement. De nombreux projets de recherche ont été stoppés tôt dans un programme de recherche ou plus tard dans le processus de révision parce que les données n'étaient pas conformes aux critères de Baron et Kenny, empêchant ainsi l'avancement théorique. Bien que la littérature technique ait contesté certains tests de Baron et Kenny, elle n'a pas été diffusée auprès des chercheurs praticiens. Nous présentons un résumé non technique des failles de la logique de Baron et Kenny, parmi lesquelles certaines n'ont pas été évoquées auparavant. Nous proposons un arbre de décision et une procédure pas à pas pour examiner la médiation, classer ses types et interpréter les implications des conclusions dans le cadre de L'élaboration de la théorie et de recherches futures.

Baron and Kenny’s procedure for determining if an independent variable affects a dependent variable through some mediator is so well known that it is used by authors and requested by reviewers almost reflexively. Many research projects have been terminated early in a research program or later in the review process because the data did not conform to Baron and Kenny’s criteria, impeding theoretical development. While the technical literature has disputed some of Baron and Kenny’s tests, this literature has not diffused to practicing researchers. We present a nontechnical summary of the flaws in the Baron and Kenny logic, some of which have not been previously noted. We provide a decision tree and a step-by-step procedure for testing mediation, classifying its type, and interpreting the implications of findings for theory building and future research.

Understanding how consumers represent outcomes and weigh different decision criteria is critical to consumer behavior research. Construal-level theory articulates how psychological distance alters the mental representation of inputs and the effective weight given to “high-level” and “low-level” criteria. Trope, Liberman, and Wakslak (2007) provide a review of this literature. In this commentary, we illustrate the relevance of construal-level theory to issues in consumer psychology, particularly consumer decision making. We highlight specific questions that researchers could address by considering consumer behavior within the framework of changes in construal. We focus our discussion on how construal levels affect consideration sets and how shifts in weight from high-level to low-level features might lead to consumer regret and dissatisfaction. Construal level can help us understand follow-through on stated intentions for “really new” products and illuminate public-policy issues such as consumer saving for retirement and nonredemption of rebates. We identify open issues related to how construal levels for the same object evolve over time and whether resources differ in terms of how susceptible they are to psychological distance effects.

Several influential streams of research in marketing, psychology, and economics conclude that when an offer a seller makes to a buyer is held fixed, the buyer will be repelled if he or she learns that some other group of buyers is getting a better price for the same benefits or receiving more benefits for the same price. Prior work has attributed this repulsion to perceptions that the offer is inequitable, that it fits others better, or that it suggests that the core product is of low value. In six experiments, the authors show conditions under which exactly the opposite can occur; that is, consumers judge the same offer to be more attractive when a seller offers a better price or more benefits to another group than when the seller treats everyone equally.

Iacobucci, Posovac, Kardes, Schneider, and Popavich (2015a) published a defense of median splits. We (McClelland, Lynch, Irwin, Spiller, and Fitzsimons 2015) and Rucker, McShane, and Preacher (2015) published criticism of each of the key conclusions from Iacobucci et al. Iacobucci et al. (2015b) then prepared a rebuttal. Iacobucci et al. believe that we have misunderstood their points, and we believe that they have misunderstood ours. Iacobucci et al. were given the last word in the pages of Journal of Consumer Psychology. We will use this SSRN outlet to say why the claims in their rejoinder are either incorrect or miss the point of our criticisms. First when only significant results are published, the fraction of published findings that are type 1 errors are a direct function of power divided by type 1 error rate. Second, Iacobucci et al. stress that their simulations were intended to apply to the case of zero multicollinearity; but in the real world with random assignment of subjects to conditions, the correlation between the median split variable and the treatment dummy can be substantial, particularly with small sample sizes. Third, they are incorrect to assert that in a moderated regression model with predictors X, Z, and X*Z it is not possible to get an effect of X or X*Z that is significant using median splits but not significant using continuous X. Finally, they ignore our point that the median split will bias the parameter estimate of the interaction in cases where it is in fact non-zero. We stand by every point in our original critique.

Many consumers suffer from low levels of financial literacy, and attempts to increase this dimension of consumer expertise via educational interventions are typically unsuccessful. We propose that many of these apparent deficits in literacy and learning may be caused by a cognitively efficient distribution of responsibility for knowledge and decision-making in different domains between relationship partners. New relationship partners adopt specialized domains of responsibility quickly and intuitively in a process guided more by circumstantial factors than by matching tasks with aptitudes (study 1). Cross-sectional data from consumers in long-term relationships provide evidence that distributions of responsibility for financial decision-making between partners may give rise to differences in financial literacy, such that the financial specialist develops expertise in this area while the non-specialist does not (study 3). This ever-growing gap in financial literacy is generally unrecognized by consumers (studies 2, 4), despite being linked to corresponding differences in both financial decision-making (studies 5, 6) and financial information search (study 6). Consumers seem to develop expertise on a “need to know” basis. We argue that offloading responsibility to a relationship partner may eliminate this need in the present, while simultaneously creating barriers to developing expertise if and when it is needed in the future.

Most consumer decisions involve trade-offs of costs and benefits over time. The research literature on “intertemporal choice” examines behavioral regularities in how people think about such decisions, drawing from marketing, psychology, and behavioral economics. This diverse literature is relevant to the analysis of public policy issues related to consumers’ discounting of future outcomes “too much” compared with sooner outcomes. A stream of outcomes can be viewed as occurring in three temporal regions: the present, the near future, and the more distant future. Somewhat different research streams have developed around the topic of underweighting outcomes in the distant (compared with the near) future and of overweighting outcomes in the present compared with any point in the future. The authors review key concepts from the literature on underweighting the distant future versus the near-term future to analyze policy issues related to consumers’ saving for retirement and their response to rebates. The authors review key concepts from the literature on impulsive behavior and present-biased preferences to analyze the problems of self-control that people have in their consumption of “sin” products that are proximate and that affect rewards in the present. The authors critique current information and incentive remedies that ignore behavioral principles from the literature, focusing their recommendations on policy interventions designed to influence eating habits and obesity and on cooling-off laws that govern return policies for consumers’ big-ticket purchases.

John G. Lynch Jr. is Roy J. Bostock Professor of Marketing, Fuqua School of Business (e-mail: john.lynch@duke.edu), and Wendy Wood is James B. Duke Professor of Psychology, Professor of Marketing, and Codirector of the Social Science Research Institute (e-mail: wendy.wood@duke.edu), Duke University. The authors thank the Fuqua School of Business, Duke University, and the Warrington College of Business, University of Florida, for financial support for a conference at Duke in May 2005, in which these articles were originally presented and discussed. They also thank the discussants at the conference who provided thoughtful commentary on the articles appearing in this special issue (including Kathryn Aikin, Pankaj Aggarwal, Tim Buthe, Noel Brewer, Bob Giloth, John Herrera, Loraine LauGesk, Alan Levy, Patrick Malone, Danny McGoldrick, Joseph Mulholland, Mike Munger, Jan Pappalardo, David Pizarro, Daniel Rodriguez, and Kevin Schulman) and Eldar Shafir who commented on a draft of this introduction. They especially appreciate JPP&M editor Joel Cohen, who offered them the opportunity to serve as guest editors of this special issue and provided many instructive comments on this editorial and other articles in the special issue that helped them and the contributing authors better understand the policy environment. This special issue of Journal of Public Policy & Marketing addresses the theme “Helping Consumers Help Themselves: Improving the Quality of Judgments and Choices,” and it is motivated by Editor Joel Cohen’s desire to bring psychological theory to bear on public policy and public policy research. His premise is that public policy in the United States and internationally is dominated by the disciplines of economics and law. In the corridors of power, however, there is little parallel discussion of useful complementary perspectives drawing on psychological theory and research. This special issue is intended to start conversations between policy makers and psychologists, behavioral economists, and consumer behavior scholars whose work challenges key assumptions in standard policy analyses. The articles in this issue center on three key interventions to public policy that are drawn from economics and that are intended to benefit consumers in the marketplace

Research in intertemporal choice has been done in a variety of contexts, yet there is a remarkable consensus that future outcomes are discounted (or undervalued) relative to immediate outcomes. In this paper, we (a) review some of the key findings in the literature, (b) critically examine and articulate implicit assumptions, (c) distinguish between intertemporal effects arising due to time preference versus those due to changes in utility as a function of time, and (d) identify issues and questions that we believe serve as avenues for future research.

The authors demonstrate that people discount delayed outcomes as a result of perceived changes over time in supplies of slack. Slack is the perceived surplus of a given resource available to complete a focal task. The present research shows that, in general, people expect slack for time to be greater in the future than in the present. Typically, this expectation of growth of slack in the future is more pronounced for time than for money. In 7 experiments, the authors demonstrate that systematic temporal shifts of perceived slack determine the extent and the pattern of delay discounting, including hyperbolic discounting. They use this framework to explain differential propensity to delay investments and receipts of time and money.

Our research examines the role of prior knowledge in learning about really new products that make existing product knowledge obsolete. Those with higher prior knowledge incorrectly generalize from their knowledge of existing products in the same product market and assume that they already know most of what is necessary to use the new product properly. Three studies demonstrate that, compared to consumers with lower prior knowledge, those with higher prior knowledge learn less about a new product. Further, higher knowledge consumers are able to learn better but learn less due to motivational deficits. Study 1 shows that, when given a cue that the new product is truly different, those with higher prior knowledge learned more than those with lower prior knowledge. In Study 2, we demonstrate that inferior learning of new product information by those with higher prior knowledge is caused by inattention at encoding rather than to reconstructive errors at retrieval. When incentives for learning were provided after encoding but prior to retrieval, those with higher prior knowledge learned less than those with lower prior knowledge. The reverse was true when incentives were provided prior to encoding. We show that these results hold both when prior knowledge is manipulated experimentally (Studies 1 and 2) and when it is an individual difference factor (Study 3).

Elements of the design, construction and later conversion of the T-AGS-39 Class Ocean Survey Ships are reviewed. The original design to a U.S. Navy Circular of Requirements is considered, presenting insight into the selection of vessel characteristics. The construction program, in concert with unique requirements, is also considered. Finally, conversion of the vessels to schoolships under the U.S. Maritime Administration, following their retirement from naval service, is discussed.

To improve audit effectiveness, public accounting firms have organized their practices to include hierarchical review by teams organized along industry lines. We examine how industry specialized auditor teams detect errors, using a sophisticated experimental design. Our analysis of nominal teams created from seniors and managers working individually shows that seniors add value to the team by detecting more mechanical errors while managers detect more conceptual errors. Working within specialization, managers and seniors both contribute in a nonredundant way to the team’s overall effectiveness. We also find that the nominal teams outperform real teams in the detection of mechanical but not conceptual errors. These results only hold when the auditors work within in their industry specialization. Out of specialization the auditors are not effective at detecting errors, and real teams perform below the nominal team benchmark in the detection of both mechanical and conceptual errors.

Is the average M&A adventure just an executive ego trip? Is it management folly, or can it be done so that it reliably produces growth? A model presented here may help executives who are engaged in making acquisitions and making them work navigate the shoals of mergers and acquisitions more successfully.

This paper shows evidence for expense neglect in how consumers forecast their future spare money or “financial slack.” Even though people generally think that both their income and expenses will rise in the future, we find that they systematically under-weigh the extent to which their expected growing expenses will cut into their spare money (Studies 1-9). We rule out the possibility that these findings are due to: measurement error (Studies 2-5); a lack of confidence in estimating future expenses (Study 6); belief in greater flexibility of future expenses (Study 7); or a general optimism bias (Study 8). Study 9 shows that consumers who are chronically attuned to expenses (tightwads) are less likely to show expense neglect than those who are not (spendthrifts). Finally, we conduct a meta-analysis of our entire file-drawer (25 studies, 7,214 participants) and find that across all studies participants place about 2.7 times the weight on income change as they do on expense change when forecasting their financial slack, and that expense neglect is stronger for the distant than near future.

Behavioral researchers use analysis of variance (ANOVA) tests of differences between treatment means or chi-square tests of differences between proportions to provide support for empirical hypotheses about consumer behavior. These tests are typically conducted on data from “between-subjects” experiments in which participants were randomly assigned to conditions. We show that, despite using internally valid experimental designs such as this, aggregation biases can arise in which the theoretically critical pattern holds in the aggregate even though it holds for no (or few) individuals. First, we show that crossover interactions—often taken as strong evidence of moderating variables—can arise from the aggregation of two or more segments that do not exhibit such interactions when considered separately. Second, we show that certain context effects that have been reported for choice problems can result from the aggregation of two (or more) segments that do not exhibit these effects when considered separately. Given these threats to the conclusions drawn from experimental results, we describe the conditions under which unobserved heterogeneity can be ruled out as an alternative explanation based on one or more of the following: a priori considerations, derived properties, diagnostic statistics, and the results of latent class modeling. When these tests cannot rule out explanations based on unobserved heterogeneity, this is a serious problem for theorists who assume implicitly that the same theoretical principle works equally for everyone, but for random error. The empirical data patterns revealed by our diagnostics can expose the weakness in the theory but not fix it. It remains for the researcher to do further work to understand the underlying constructs that drive heterogeneity effects and to revise theory accordingly.

A fundamental dilemma confronts retailers with stand-alone sites on the World Wide Web and those attempting to build electronic malls for delivery via the Internet, online services, or interactive television (Alba et al. 1997). For consumers, the main potential advantage of electronic shopping over other channels is a reduction in search costs for products and product-related information. Retailers, however, fear that such lowering of consumers' search costs will intensify competition and lower margins by expanding the scope of competition from local to national and international. Some retailers' electronic offerings have been constructed to thwart comparison shopping and to ward off price competition, dimming the appeal of many initial electronic shopping services. Ceteris paribus, if electronic shopping lowers the cost of acquiring price information, it should increase price sensitivity, just as is the case for price advertising. In a similar vein, though, electronic shopping can lower the cost of search for quality information. Most analyses ignore the offsetting potential of the latter effect to lower price sensitivity in the current period. They also ignore the potential of maximally transparent shopping systems to produce welfare gains that give consumers a long-term reason to give repeat business to electronic merchants (cf. Alba et al. 1997, Bakos 1997). We test conditions under which lowered search costs should increase or decrease price sensitivity. We conducted an experiment in which we varied independently three different search costs via electronic shopping: search cost for price information, search cost for quality information within a given store, and search cost for comparing across two competing electronic wine stores. Consumers spent their own money purchasing wines from two competing electronic merchants selling some overlapping and some unique wines. We show four primary empirical results. First, for differentiated products like wines, lowering the cost of search for quality information reduced price sensitivity. Second, price sensitivity for wines common to both stores increased when cross-store comparison was made easy, as many analysts have assumed. However, easy cross-store comparison had no effect on price sensitivity for unique wines. Third, making information environments more transparent by lowering all three search costs produced welfare gains for consumers. They liked the shopping experience more, selected wines they liked more in subsequent tasting, and their retention probability was higher when they were contacted two months later and invited to continue using the electronic shopping service from home. Fourth, we examined the implications of these results for manufacturers and examined how market shares of wines sold by two stores or one were affected by search costs. When store comparison was difficult, results showed that the market share of common wines was proportional to share of distribution; but when store comparison was made easy, the market share returns to distribution decreased signi.cantly. All these results suggest incentives for retailers carrying differentiated goods to make information environments maximally transparent, but to avoid price competition by carrying more unique merchandise.

Winer (1999 [this issue]) proposes that external validity concerns require more attention in theoretical research. The author argues that one cannot “enhance” external validity by choosing one method over another. External validity can only be “assessed” by better understanding how the focal variables in one’s theory interact with moderator variables that are seen as irrelevant early in a research stream. Findings from single real-world settings and specific sets of “real” people are no more likely to generalize than are findings from single laboratory settings with student subjects. Both the laboratory and real world vary in background facets of subject characteristics, setting, context, relevant “history,” and time. It is only when these facets vary and we see how they interact that understanding of external validity is enhanced. For this to happen, the observable “background” factors have to be conceptualized in terms of more general constructs and incorporated as moderators into the researcher’s theory. Enriched theory—not method—confers confidence in our understanding of whether effects will be robust or highly contingent. To map this knowledge to some specific substantive system requires an added step of understanding the mapping from observables in that system onto theoretical constructs. The author proposes “friendly amendments” to Winer’s three proposals to pursue a better understanding of external validity through theory.

I discuss how the Multiple Pathway Anchoring and Adjustment model is similar to and different from the Feldman and Lynch accessibility-diagnosticity model, elaborated as an anchoring and adjustment model by Lynch, Marmorstein, and Weigold. Cohen and Reed's concept of representational sufficiency embraces both attitude coherence and retrieval fluency; these map to prior operationalizations of diagnosticity in past accessibility-diagnosticity research. Cohen and Reed's functional sufficiency maps closely to Lynch et al.'s notion of a comparison of cumulative diagnosticity to a diagnosticity threshold in an anchoring and adjustment process. I identify differences between the two models and call for research to distinguish their predictions.

The authors examine the implications of electronic shopping for consumers, retailers, and manufacturers. They assume that near-term technological developments will offer consumers unparalleled opportunities to locate and compare product offerings. They examine these advantages as a function of typical consumer goals and the types of products and services being sought and offer conclusions regarding consumer incentives and disincentives to purchase through interactive home shopping vis-à-vis traditional retail formats. The authors discuss implications for industry structure as they pertain to competition among retailers, competition among manufacturers, and retailer-manufacturer relationships.

Decision-makers often do not or cannot predict at the time of choice howtheir tastes may change by the time the outcomes are experienced. This paperexplores the implications of making decisions by maximizing experiencedutility ex post rather than ex ante. Focusing on being satisfied with choicein retrospect results in quite different kinds of problems than aprospective orientation that projects one's current preferences into thefuture. We examine a number of ways that people can easily mistake theirreactions to outcomes in the future, and propose a series of hypothesesrelated to how people will be dissatisfied with their choices. Finally, werelate these barriers to good decisions to prescriptive processes thatassist people in making decisions with which they will be happy in thefuture.

The effect of advertising on consumer welfare has been the subject of dispute among economists, arising largely from disagreement among scholars regarding the persuasive versus the informative role of advertising. This paper reports two experiments that explore the welfare implications of advertising effects. Experiment 1 shows that the same advertisements can either increase or decrease prices paid for selected brands, depending on the degree to which the choice situation requires brands to be recalled in order to be considered. However, an increase in prices paid caused by advertising does not necessarily imply detrimental effects on consumer welfare. Experiment 2 shows that, even under circumstances in which differentiating advertising leads consumers to select brands with higher average prices, it can provide useful information to consumers that allows them to make purchases that are more in line with their personal tastes than are the choices of consumers not exposed to the advertisements.

Previous research has predicted that direct product experience will be superior to advertising in communicating information about products. In experiment 1 of the present study, claims about search attributes were better recognized and beliefs about search attributes were more accessible and more confidently held after exposure to ads in comparison with direct experience of two inexpensive packaged products. Experiment 2 replicated the above effects on claim recognition, belief accessibility, and confidence for two consumer durables under low-involvement conditions. It also showed that search attributes were more frequently mentioned and were rated as more important after exposure to advertising than after direct experience; the opposite was true for experience attributes. These effects on frequency of mention and attribute importance were significantly weaker under high-involvement than under low-involvement conditions. Copyright 1995 by the University of Chicago.

Prior work on the economic effects of advertising has presented conflicting views. Some authors have suggested that advertising creates market power by artificially differentiating brands and thereby lowering price elasticity. Others have viewed advertising as an efficient source of information about the existence of substitutes, arguing that advertising increases price elasticity. The present research proposes a unifying theoretical model in which advertising affects price elasticity through its influence on two mediating constructs: the size of the consideration set and the relative strength of preference. Pretests 1 and 2 examine the effects of advertising on these two constructs. Results from the main experiment show that, in accordance with the theoretical framework, the same advertisements that increased price elasticity in some decision environments decreased it in others. Copyright 1995 by the University of Chicago.

Past discussions of manipulation checks and related measures have produced disagreement about their role in tests of theoretical explanations of consumer behavior. We use a Bayesian analysis to examine what such measures contribute to researchers' beliefs about competing theories and suggest when and why manipulation and confounding checks add to the ability to differentiate among alternative theoretical explanations of empirical results. We first focus on the case in which a statistically significant between-group difference on the dependent variable is augmented by information from a single indicator of the intended manipulation and a single indicator of a possible confound. We then examine the implications of multiple indicators and the use of a Bayesian analysis of continuous effect sizes. Copyright 1995 by the University of Chicago.

Regulators of utilities that operate as local monopolies would like to set prices or allow rates of return based upon the quality of a utility's service. However, quality is highly multidimensional. Traditionally, regulators have collected measures of quality on many separate dimensions, and compared performance on these dimensions to explicit pass-fail standards. They have lacked a method of combining complex patterns of substandard and superstandard performance on these many dimensions to arrive at an overall evaluation of the quality of service. To redress this problem, we first describe the information processing problems regulators encounter when they attempt to integrate this complex array of information intuitively, and the problems that arise when the link between service quality (as reflected in patterns of passed and failed standards) and regulatory incentives is not made explicit to utility management. We develop a bootstrapped method for formalizing each expert regulator's evaluation policy using hierarchical conjoint analysis, and apply this method to the evaluation of local telephone companies by the Florida Public Service Commission (FPSC). We show that experts within the FPSC, the regulated utilities, and a large telephone customer exhibit very high agreement about how the various dimensions of quality should be differentially weighted. We derive a consensus measure of overall quality, Q̂, and identify a score associated with meeting all standards exactly, Q̂*. Utilities can then be rewarded based upon whether or not they exceed Q̂*, rather than on the basis of how many standards are met. Compared with a pattern in which each standard is met exactly, there exist patterns of mixed substandard and superstandard performance on the individual dimensions of quality that are less costly to produce and higher in overall quality. We compare utility incentives when rewards are based upon Q̂ to those under the current pass-fail regime.

People underestimate how long it takes to complete various projects. Researchers have proposed that this planning fallacy extends to underestimation of money expenditures as well, though empirical work has focused on the planning fallacy for time. In three studies, we find that participants acknowledge smaller, less frequent planning fallacies for money than for time, that participants do not exhibit a planning fallacy for money but do for time, and that this difference between money and time is mediated by resource-specific propensity to plan. Individuals generally plan more for time than for money, and those who plan more for a given resource exhibit a greater planning fallacy. This ironic effect of planning is consistent with the prior literature on “inside” thinking about successful execution of the plan versus “outside” thinking about events external to the plan.