It is no secret that consumers often perceive a price-quality relationship, attributing higher quality to products for which they pay more. A large body of pricing research supports the existence of this phenomenon and it is not hard to find personal examples. But what happens when price is compared to objective quality as measured by say, Consumer Reports? Strangely, the relationship between price and quality almost completely disappears. Why? New research points to a placebo action in marketing whereby self-fulfilling expectations could lead lower priced products to perform worse. In other words the quality you get may be related to what you pay because you (unconsciously, it appears) deem it so.
Do you spend money a little too easily or does it hurt to spend at all? Do you wonder if you are the only one or if other people have the same problem too? Does your gender, age or income have anything to do with whether you are a tightwad or a spendthrift? What effect do marketing offers have on your tendency to hand over the cash, or for that matter, your credit card? Recent research shows that tightwads and spendthrifts do exist and are quite different in these behaviors.
OK, so Jeopardy! cannot possibly explain all the differences between the genders, but it helps quite a bit in understanding financial risk taking because of its unique format. Researchers studying gender differences in risk taking have known that men and women are different in several ways. For example, in general men are more willing to take risks, single women allocate less wealth to risky assets compared to single men, women have lower risk tolerance on health and retirement issues, women prefer broader insurance coverage than men, and men are more active in stock trading. But is it just gender or are there other factors mixed in with gender that influence financial risk taking? For example, would competence have an impact and how does that vary by gender? This was the issue studied by three researchers using data from the game show Jeopardy!
Do you form judgments of others based on how they look? Very likely. These judgments are not just about commonly understood features such as skin color, but also about more subtle ones like the shape of a person's face. Research has shown that babyfaced people are seen as kinder, warmer and physically weaker than maturefaced people, as well as more honest and naive. Given this, are there consequences for a company that has a babyface CEO (or spokesperson) in a time of crisis? Will the shape of the person's face affect how the company is perceived and will these considerations have an effect on the hiring of a new CEO? These questions were investigated by some researchers in a series of experiments.
Let's say you are a cell phone manufacturer and you have to make a decision about a new phone. Your clever engineers have developed several new features that could make your phone much more distinctive in the market. What do you do? Do you put as many features as you can into one phone, or do you introduce several phones, each with a different set of features? Researchers at the University of Maryland asked this question and conducted a series of experiments to answer it. Surprisingly, their conclusion is that having a larger number of specialized products would be better in the long run.
In a series of classic studies done in the 1960's, the Swiss developmental psychologist Jean Piaget showed how children can misperceive volume. When colored liquid was poured from a taller cylinder to a shorter wider cylinder, they thought the volume of liquid had decreased. These primary school children were using only the height of the container when making volume judgments and were hence making mistakes. Ah, you say, they are children and are naive enough not to understand that more than height goes into determining the volume of liquid in a container. Full grown adults would never make that mistake. Why, if such height based illusions existed, wouldn't restaurants routinely use tall thin glasses to pour your drinks, rather than short wide glasses? Well.
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