Benartzi, S., &Thaler, R. H. (1999). Risk aversion or myopia? Choices in repeated gambles and retirement investments. Management science, 45(3), 364-381.

We study how decision makers choose when faced with multiple plays of a gamble or investment. When evaluating multiple plays of a simple mixed gamble, a chance to win x or lose y, subjects show a sensitivity to the amount to lose on a single trial, holding the distribution of returns for the portfolio constant; that is, they display “myopic loss aversion.” Many subjects who decline multiple plays of such a gamble will accept it when shown the resulting distribution. This analysis is applied to the problem of retirement investing. We show that workers invest more of their retirement savings in stocks if they are shown long-term (rather than one-year) rates of return.

 

 

Benartzi, S., &Thaler, R. H. (1999). Risk aversion or myopia? Choices in repeated gambles and retirement investments. Management science, 45(3), 364-381.

https://doi.org/10.1287/mnsc.45.3.364

 

 

Arkes, H. R., &Blumer, C. (1985). The psychology of sunk cost. Organizational behavior and human decision processes, 35(1), 124-140.

The sunk cost effect is manifested in a greater tendency to continue an endeavor once an investment in money, effort, or time has been made. Evidence that the psychological justification for this behavior is predicated on the desire not to appear wasteful is presented. In a field study, customers who had initially paid more for a season subion to a theater series attended more plays during the next 6 months, presumably because of their higher sunk cost in the season tickets. Several questionnaire studies corroborated and extended this finding. It is found that those who had incurred a sunk cost inflated their estimate of how likely a project was to succeed compared to the estimates of the same project by those who had not incurred a sunk cost. The basic sunk cost finding that people will throw good money after bad appears to be well described by prospect theory (D. Kahneman & A. Tversky, 1979, Econometrica, 47, 263–291). Only moderate support for the contention that personal involvement increases the sunk cost effect is presented. The sunk cost effect was not lessened by having taken prior courses in economics. Finally, the sunk cost effect cannot be fully subsumed under any of several social psychological theories.

 

 

Arkes, H. R., &Blumer, C. (1985). The psychology of sunk cost. Organizational behavior and human decision processes, 35(1), 124-140.

https://doi.org/10.1016/0749-5978(85)90049-4 

 

Amir, O., Ariely, D., &Carmon, Z. (2008). The dissociation between monetary assessment and predicted utility. Marketing Science, 27(6), 1055-1064.

We study the dissociation between two common measures of value—monetary assessment of purchase options versus the predicted utility associated with owning or consuming those options, a disparity that is reflected in well-known judgment anomalies and that is important for interpreting market research data. We propose that a significant cause of this dissociation is the difference in how these two types of evaluations are formed—each is informed by different types of information. Thus, dissociation between these two types of measures should not be interpreted as failure to map utility onto money, as such mapping is not really attempted. We suggest that monetary assessment tends to focus on the transaction in which the purchase alternative would be acquired or forgone (e.g., how fair the transaction seems), failing to adequately reflect the purchase alternative itself (e.g., the expected pleasure of owning or consuming it), which is what informs predicted utility judgments. We illustrate the value of this idea by deriving and testing empirical predictions of disparities in the impact of different types of information and manipulations on the two types of value assessment.

 

 

Amir, O., Ariely, D., &Carmon, Z. (2008). The dissociation between monetary assessment and predicted utility. Marketing Science, 27(6), 1055-1064.

https://doi.org/10.1287/mksc.1080.0364

 

 

Simmons, J. P., LeBoeuf, R. A., &Nelson, L. D. (2010). The effect of accuracy motivation on anchoring and adjustment: Do people adjust from provided anchors?

Increasing accuracy motivation (e.g., by providing monetary incentives for accuracy) often fails to increase adjustment away from provided anchors, a result that has led researchers to conclude that people do not effortfully adjust away from such anchors. We challenge this conclusion. First, we show that people are typically uncertain about which way to adjust from provided anchors and that this uncertainty often causes people to believe that they have initially adjusted too far away from such anchors (Studies 1a and 1b). Then, we show that although accuracy motivation fails to increase the gap between anchors and final estimates when people are uncertain about the direction of adjustment, accuracy motivation does increase anchor–estimate gaps when people are certain about the direction of adjustment, and that this is true regardless of whether the anchors are provided or self-generated (Studies 2, 3a, 3b, and 5). These results suggest that people do effortfully adjust away from provided anchors but that uncertainty about the direction of adjustment makes that adjustment harder to detect than previously assumed. This conclusion has important theoretical implications, suggesting that currently emphasized distinctions between anchor types (self-generated vs. provided) are not fundamental and that ostensibly competing theories of anchoring (selective accessibility and anchoring-and-adjustment) are complementary.

 

 

Simmons, J. P., LeBoeuf, R. A., & Nelson, L. D. (2010). The effect of accuracy motivation on anchoring and adjustment: Do people adjust from provided anchors? Journal of Personality and Social Psychology, 99(6), 917-932.

http://dx.doi.org/10.1037/a0021540  

Norton, M. I., Mochon, D., &Ariely, D. (2012). The IKEA effect: When labor leads to love. Journal of consumer psychology, 22(3), 453-460.

In four studies in which consumers assembled IKEA boxes, folded origami, and built sets of Legos, we demonstrate and investigate boundary conditions for the IKEA effect—the increase in valuation of self-made products. Participants saw their amateurish creations as similar in value to experts’ creations, and expected others to share their opinions. We show that labor leads to love only when labor results in successful completion of tasks; when participants built and then destroyed their creations, or failed to complete them, the IKEA effect dissipated. Finally, we show that labor increases valuation for both “do-it-yourselfers” and novices.

 

 

Norton, M. I., Mochon, D., &Ariely, D. (2012). The IKEA effect: When labor leads to love. Journal of consumer psychology, 22(3), 453-460.

https://doi.org/10.1016/j.jcps.2011.08.002

 

 

Carmon, Z., &Ariely, D. (2000). Focusing on the forgone: How value can appear so different to buyers and sellers. Journal of consumer research, 27(3), 360-370.

We propose that buying- and selling-price estimates reflect a focus on what the consumer forgoes in the potential exchange and that this notion offers insight into the well-known difference between those two types of value assessment. Buyers and sellers differ not simply in their valuation of the same item but also in how they assess the value. Buyers tend to focus on their sentiment toward what they forgo (typically, the expenditure), and buying prices are thus heavily influenced by variables such as salient reference prices. By the same token, sellers tend to focus on their sentiment toward surrendering the item, and selling prices are hence more heavily influenced by variables such as benefits of possessing the item. Four studies examining buying- and selling-price estimates of tickets for National Collegiate Athletic Association basketball games offer consistent support for these ideas. The studies show that naturally occurring differences among respondents in attitudes relating to the tickets that sellers forgo (e.g., significance of the game) corresponded more closely to variation in selling prices than in buying prices. Conversely, measures relating to the expenditure (e.g., respondents’ concern with money) corresponded more closely to buying prices than to selling prices. Using controlled manipulations we then showed that changes in aspects relating to the game (e.g., expected climate in the stadium) affected selling prices more than buying prices, but changes relating to the expenditure (e.g., list price of the ticket) influenced buying prices more than selling prices. We also showed that drawing attention to the benefits of possessing a ticket before asking for the price estimates influenced buying prices more than selling prices, supporting our claim that otherwise these benefits are naturally more salient to sellers than buyers. Similarly, drawing attention to alternative uses of money before asking for price estimates influenced selling prices more than buying prices.

 

 

Carmon, Z., &Ariely, D. (2000). Focusing on the forgone: How value can appear so different to buyers and sellers. Journal of consumer research, 27(3), 360-370.

https://doi.org/10.1086/317590

Wolf, J. R., Arkes, H. R., &Muhanna, W. A. (2008). The power of touch: An examination of the effect of duration of physical contact on the valuation of objects

The duration of ownership has been shown to increase the valuation of items that people currently own as well as items they have owned in the past, a phenomenon termed the “length-of-ownership effect.” We hypothesize that the duration of exposure to an item will foster increased pre-ownership attachment to an item and increased valuations in a manner similar to duration of actual ownership. We examine this effect in two experiments, both variations of the classicmugexperiment. Toinducedifferentlevelsofexposure,wevariedtheamountoftimethatparticipantsexamined the auctioned item (i.e., coffee mugs) prior to participating in real dollar auctions. In the first study, participants bid in onlineEnglishopenbidauctions. Inthesecondstudy,participantsbidinfirst-pricesealedbidauctions. Inbothcasesof duration of physical contact positively influenced valuations (i.e., bid levels).

 

 

Wolf, J. R., Arkes, H. R., &Muhanna, W. A. (2008). The power of touch: An examination of the effect of duration of physical contact on the valuation of objects. Judgment and Decision Making, 3(6), 476.

 

 

Prelec, D., &Simester, D. (2001). Always leave home without it: A further investigation of the credit-card effect on willingness to pay. Marketing letters, 12(1), 5-12.

In studies involving genuine transactions of potentially high value we show that willingness-to-pay can be increased when customers are instructed to use a credit card rather than cash. The effect may be large (up to 100%) and it appears unlikely that it arises due solely to liquidity constraints. In addition to demonstrating the effect, we provide a methodology for detecting it, and our findings suggest a source of variance to test alternative explanations.

 

 

Prelec, D., &Simester, D. (2001). Always leave home without it: A further investigation of the credit-card effect on willingness to pay. Marketing letters, 12(1), 5-12.

https://doi.org/10.1023/A:1008196717017

 

 

Feinberg, R. A. (1986). Credit cards as spending facilitating stimuli: A conditioning interpretation. Journal of consumer research, 13(3), 348-356.

Four experiments and one study were conducted to test the hypothesis that stimuli associated with spending can elicit spending responses. In all experiments, credit card stimuli were either present or absent in situations in which subjects were given an opportunity to spend. Credit card stimuli directed spending such that the probability, speed, or magnitude of spending was enhanced in the presence of credit card cues. A conditioning explanation was used to interpret the results.

 

 

 

Feinberg, R. A. (1986). Credit cards as spending facilitating stimuli: A conditioning interpretation. Journal of consumer research, 13(3), 348-356.

https://doi.org/10.1086/209074

 

 

Chatterjee, P., &Rose, R. L. (2011). Do payment mechanisms change the way consumers perceive products?. Journal of Consumer Research, 38(6), 1129-1139.

Do payment mechanisms change the way consumers perceive products? We argue that consumers for whom credit cards (cash) have been primed focus more on benefits (costs) when evaluating a product. In study 1, credit card (cash) primed participants made more (fewer) recall errors regarding cost attributes. In a word recognition task (study 2), participants primed with credit card (cash) identified more words related to benefits (costs) than those in the cash (credit card) condition. In study 3, participants in the credit card (cash) condition responded faster to benefits (costs) than to costs (benefits). This differential focus led credit card primed consumers to express higher reservation prices (studies 1–3) and also affected their product choices (study 4) relative to those primed with cash.

 

 

Chatterjee, P., &Rose, R. L. (2011). Do payment mechanisms change the way consumers perceive products?. Journal of Consumer Research, 38(6), 1129-1139.

https://doi.org/10.1086/661730