A. Yeşim Orhun
A. Yeşim Orhun
Frugality is Hard to Afford, with Mike Palazzolo
Abstract: Households commonly utilize strategies that provide long-term savings on everyday purchases in exchange for an increase in their short-term expenditures. For example, they buy larger packages of non-perishable goods to take advantage of bulk discounts, and accelerate their purchases to take advantage of temporary discounts. However, use of such strategies requires that households have the liquidity necessary to increase their short-term spending. Using the Nielsen consumer panel dataset, this paper provides causal evidence that liquidity constraints inhibit low-income households’ ability to use such strategies, above and beyond the impact of other constraints, revealing a previously undocumented dimension of the poverty penalty. Our finding suggests that low-income households will be less responsive to promotions that require intertemporal substitution than their higher-income counterparts, and that they will be more responsive during times of higher liquidity (e.g., shortly after receiving paychecks) than during times of lower liquidity. We discuss marketing and policy implications of this result.
Intrinsic Information Preferences and Skewness (with Collin Raymond and Yusufcan Masatlioglu)
Abstract: We present experimental results from a broad investigation of intrinsic preferences for information. We examine whether people prefer negatively skewed or positively skewed information structures when they are equally informative, whether people prefer Blackwell more informative information structures, and how individual preferences over the skewness and the degree of information relate to one another. The wide scope of our investigation not only reveals new insights regarding intrinsic preferences for information, but as we show, also allows for testing of existing models in this domain. We find that models based on the framework of Kreps and Porteus (1978) and Caplin and Leahy (2001), are the most consistent with the data we observe.
Impact of Status Incentives: The Case of the Airline Industry
We are revising the paper, please email me for the latest version.
Abstract. This paper explores the impact of status incentives provided by a major U.S. airline on the purchasing behavior of its frequent flier program members. We leverage a database of complete transaction histories of more than six million members to study within-person changes in purchases as members progress towards a status goal. We show that within-person changes in the distribution of price and route characteristics of tickets purchased from the airline reflect consumer substitution behavior from competing alternatives. We present three empirical manifestations of increased customer loyalty on market outcomes. When members are close to achieving their status goal compared to when they are starting to accumulate points, they 1) book with the airline even at higher prices than usual, increasing the price they pay compared to other passengers by about 8% on average, 2) become more likely to choose the airline over the competition on routes where the airline is generally less attractive and more expensive compared to its competitors, and 3) substitute from driving or taking other forms of transportation on shorter trips to flying with the airline.
Systematic Differences in Beliefs About Others in Strategic Interactions
Please click here for the paper
Abstract: Individuals’ preferences for outcomes and their expectations about other players’ choices that influence the outcome govern strategic interactions. The common assumption that expectations about others are mutually consistent across players allows researchers to infer preferences from observed strategic decisions. In this paper, I show how players beliefs about other players choices systematically depart from this assumption and explain the consequences for the inference of preferences based on strategic choices. In the context of altruistic preferences, I document a relationship between an individual’s preferences and his (implicit or explicit) expectations of others’ actions in modified dictator games. This relationship is beyond what false consensus or a simple correlation between beliefs and preferences can account for and is consistent with a more fundamental account of projection of preferences. I study the impact of systematic belief differences on players strategic actions in a trust-dictator game. I show that preference incongruencies across different roles in a trust-dictator game are in line with preference projection. Finally, I demonstrate biases in the estimation of preferences from decisions in this strategic game under the assumption of mutually consistent beliefs.
Guilt Aversion Revisited: Not All Expectations are Alike
Threat of Entry: Airlines’ Product Responses, with Ying Fan
Positive Reciprocity Puzzle: Fitting the Pieces Together
Social Pricing in Sharing Economy: Evidence from Airbnb, with Yao Cui and Ming Hu