University of Arkansas

Walton College

The Sam M. Walton College of Business

Presentations and Recent Research

Presentations

Andy Brownback

Wednesday, September 20, 12:00-1:00pm

JBHT 128 (BBRL Conference room)

Title: Attribution Bias, Blame, and Strategic Confusion in Punishment Decisions

Abstract:

Research has shown that people have difficulty disentangling the roles of effort and luck when evaluating decisions made under uncertainty by others. In an experimental context where an agent's effort is always perfectly observable, we replicate the undue influence of luck on subsequent punishment decisions made by a principal. Our experiment identifies attribution bias as a mechanism driving this behavior---lucky agents are perceived to be more hardworking than unlucky ones. We test the sophistication of both the principals and agents about this bias. Agents show positive willingness to pay for control over the principal's access to information about luck but principals show no demand to eliminate news about the agent's luck from their information set. We replicate these findings with 3rd parties tasked with punishing agents and draw policy implications for what information should be available to judges and juries.

 

Ji Yong Lee

Title: Cognitive Ability and Bidding Behavior in Second Price Auctions

Wednesday, October 11, 12:00-1:00pm

JBHT 128 (BBRL Conference room) 

 

Yanji Duan

Title: Role Played Matters? The Different Effect of Information Sharing and Risk Attitude on Retailers and Suppliers under Drop-shipping Context

Abstract:

Contemporarily, more and more online retailers decide to stay away from inventory keeping and forward the orders to their upstream suppliers. Such practice, also known as drop-shipping, has gain increasing popularity due to its potential to provide benefits to both retailers and suppliers. This study explores how drop-shipping can change the retailer-supplier dynamics by through the lens of agency theory. More specifically, findings from multiple behavioral studies demonstrate that the effect of information sharing and risk attitude are contingent on the role played to influence drop-shipping performance. The retailers and the suppliers are influenced differently by information sharing behavior and the risk attitude. These results not only provide important managerial implication about how to conduct drop-shipping more efficiently but also extend the current understandings about agency theory and information sharing literature.

Keywords: Drop-shipping; Information sharing; Role played;

Wednesday, November 15, 12:00-1:00pm

JBHT 128 (BBRL Conference room)

Recent Research

The Bottom Dollar Effect: The Influence of Spending to Zero on Pain of Payment and Satisfaction

-Robin Soster

As the phrase “bet your bottom dollar” implies, when people are running out of money, they may spend more carefully. But what about once they’ve spent it?

New research finds that people are less satisfied with what they have purchased with their bottom dollar compared to the same purchases made with dollars when they are flush.

In a December 2014 article from the Journal of Consumer Research, researchers had participants first earn resources to fund a budget, and then spend those resources on things like movie downloads. Then they measured how satisfied people were with the movies they had bought. What they found was that participants were less satisfied with the same movie if it was purchased with the very last of a budget than if it was purchased with plenty of money remaining in the budget.

The authors call this “the bottom dollar effect,” and they show it happens because, as dollars are spent, the remaining dollars feel more valuable which makes parting with them more painful. This makes the product feel more costly, so people are less satisfied with what they buy. “Past research has considered how resource availability influences spending. We look at the relationship between the pain of spending and satisfaction, empirically testing the ‘bottom dollar effect’ when people evaluate real products—purchased with real resources,” says Robin Soster, assistant professor of marketing at the Walton College of Business, University of Arkansas.

Other studies in the article explore when spending the bottom dollar will most impact satisfaction. For example, the authors find that if a consumer thinks it is difficult to earn resources to replenish her budget, or if their budget won’t be replenished for a long time, satisfaction with the same item ends up being lower. The authors also find that getting free money—just as budgets are running out—increases satisfaction with what was purchased more than getting the same windfall if one already has plenty of resources. These findings are important from a consumer well-being perspective because they reveal that satisfaction is influenced by more than the experience of a product and its cost. It is also influenced by how painful it feels for consumers to part with their money, and this pain is higher when consumers are running out of money compared to when they are flush. So two people purchasing a ticket for the same film at the same price may experience significant differences in satisfaction with the movie, based solely upon their entertainment budget’s balance when that ticket is purchased.

Other practical implications arise from these findings. First, since most consumers’ budgets follow cyclical patterns—increasing from inflows of money like pay checks; decreasing from outflows like regular expenses and bills —we may all suffer from ups and downs in satisfaction due to the ebbs and flows of our account balances. In addition, some people may be particularly susceptible to these variations in satisfaction.

For example, people receiving wages on a daily basis might experience the bottom dollar effect more often than those receiving a set salary on a monthly or bi-monthly basis. Those who pay more attention to their personal budgets may also experience this effect more often than those who pay little attention to financial matters. In this manner, people who engage in positive financial behaviors, such as creating and/or sticking to budgets, may actually experience negative outcomes—less satisfying consumption experiences. These outcomes are important for researchers and policy makers investigating impoverished or disadvantaged consumers as well as outcomes related to financial planning or decision making.

Retailers and marketers may find these results important because when satisfaction is influenced by bottom dollar spending, it is possible that consumers may believe they have received a “bad deal,” and this may make it less likely that they will buy that product again. Yet the results suggest ways in which marketers may combat the bottom dollar effect simply by adjusting promotion strategies. For example, if a consumer is not satisfied with a product the first time he tries it, he may never buy it again, so to increase the likelihood that consumers will be satisfied, marketers might use advertising and other promotions at the beginning of the month, or just after consumers get tax refunds, to make it more likely that budgets are not approaching exhaustion at the time of purchase.

The end of the month, when more consumers are likely to be spending their bottom dollars, may be the time to use special pricing incentives–like surprise coupons– to reduce the pain of paying, not only to make the sale, but also to increase satisfaction.

While some people may be able to mitigate the effects of bottom dollar spending by just ignoring their budgets, a more fiscally-responsible response to our findings would be to make important purchases only when budgets are flush with resources. Although waiting a day or two for one’s paycheck receipt may be a difficult exercise in self-control, our findings suggest that waiting may actually increase happiness. As Annie said, “Bet your bottom dollar that tomorrow, there’ll be sun!”