Browsing by Subject "Business Administration, Marketing"

Consumers often lack objective information about product acquisition costs. In such cases, consumers must rely on estimates of acquisition costs in making their choices. The current work examines the influence of mental simulations of product acquisition on estimates of acquisition costs. We suggest that simulations of product acquisition lead estimates to reflect the influence of consumers' current physical states on the experience of a particular cost. Specifically, carrying a heavy burden leads consumers to estimate higher distances to targets when they engage in simulation of walking to targets, but not when they do not engage in such simulation.

Simulation can be either deliberate or spontaneous. Deliberate simulation is engaged when consumers intentionally simulate an action. Spontaneous simulation requires particular conditions for its occurrence, but does not require conscious intent. The specific conditions for the occurrence of spontaneous simulation are the availability of situational inputs and that action be possible in the given situation. We support these ideas in a series of studies.

Study 1 demonstrates preference shifts that occur as a consequence of participants carrying heavy burdens. Participants in this study shifted their preference from an option located a visible but undefined distance away towards one that was available at their current location. Study 2 supports the theory that this shift occurs as a consequence of alterations in estimates of acquisition costs by showing that burdened participants estimate distances as greater than do unburdened participants.

Study 3 provides evidence for the role of mental simulation in producing such changes in estimated acquisition costs by showing that the distance expansion first demonstrated in study 2 occurs when targets are visible, but not when targets are not visible. This result is consistent with the central contention of this dissertation that visibility is critical for spontaneous simulation. Together, the studies support the role of spontaneous simulation in burden leading to distance expansion. Study 4 provides further support for the role of simulation in producing the effects of physical state on estimated acquisition costs by showing deliberate simulation results in similar distance to that of spontaneous simulation.

Studies 5 and 6 further demonstrate the dual roles of spontaneous and deliberate simulation on distance expansion. They show that expansion does not occur when targets are not reachable because they are up in the air (study 5). However, deliberate simulation of realistic (climbing - study 5) or unrealistic (flying - study 6) action restores distance expansion in those circumstances, supporting the role of simulation in leading to consideration of physical state in estimated acquisition costs.

The final study ties together these results by demonstrating the effects of both spontaneous and deliberate simulation in a single setting. Varying both the availability of conditions supporting spontaneous simulation and instructions for deliberate simulation the study allows an examination of the comparative effects of the two types of simulation and of their potential interaction. The study finds that deliberate simulation may produce effects that are larger than those of spontaneous simulation, but spontaneous simulation does not seem to enhance the effects of deliberate simulation.

The ability to digitize information goods such as music and movies and the growing accessibility of the Internet has led to online piracy and the emergence of a new class of retailers that specialize in digital downloads. Both online piracy and digital retailers have changed the dynamics of the information goods distribution channel. In my dissertation I focus on issues related to this change.

In the first chapter, "Digital music set free: the flip side of DRM," I study the effect of Digital Rights Management (DRM) mechanisms on the competition between traditional and digital retailers and on online piracy. DRM refers to technologies designed to control how end users may access, copy, or convert digital media. In the context of music downloads, DRM makes piracy of digital music more difficult, and until recently, most legal outlets for downloadable music only sold songs with DRM protection. Recently download retailers have convinced record companies to allow them to sell DRM-free music. The introduction of DRM-free music raises several important questions: Will music piracy increase as the opponents of DRM-free music predict? Will the music industry profits go up or down? How will CD retailers be affected? Will all labels start selling the unprotected (DRM-free) content?

I address these and related questions by developing a model of a music distribution channel that allows a record label to sell through both traditional CD retailers and iTunes-like download services at different wholesale prices. Among the interesting results, the analysis indicates that the level of piracy may decline when DRM protection is removed and that the traditional retailers much prefer to compete with distributors of pirated digital music rather than with legal music download services.

The competition between online and traditional retailers has led to interesting pricing policies on which I focus in the second chapter, "Digital movies at one simple price: the effect on competition." Online retailers tend to prefer uniform pricing (e.g. iTunes Store) where all "products" carry a single price, while traditional retailers do not have a policy of uniform prices. It is important to understand why one retailer should choose a single, uniform price and what impact it has on the competing retailer who chooses multiple prices. I focus specifically on the impact that single price policy adopted by digital retailer has on the traditional retailer. I also analyze the choice of uniform vs. differentiated pricing by modeling the competition between online and traditional retailers for vertically differentiated information goods. Importantly, I demonstrate how the asymmetric equilibrium we observe in the market today can change systematically with the nature of competition between the retailers.

Marketers seek to create and consumers seek to cultivate a variety of positive emotional experiences. Despite their importance to consumer behavior, researchers have lacked a clear understanding of the distinct behavioral consequences of specific positive emotions. My dissertation examines how different positive emotions (e.g., hope, love, and pride) can differentially affect consumers' decisions and behaviors. I find that positive emotions can not only be differentiated but also that specific positive emotions lead to distinctly different patterns of consumption behavior, such as considering more options, donating in different ways, engaging in more effortful actions, or performing more socially conscious consumption behaviors benefiting distant others. I find important differences both with momentary emotional experiences and downstream consequences of chronic emotional experiences.

Positive emotions differ reliably in the degree to which they create a lens of problem-solving, social connection, and perceived control. For example, I find that positive emotions characterized by a social connection lens (e.g., love and gratitude) lead to increases in socially conscious behaviors benefiting distant others. The tendency to perceive one's environment through a problem-solving lens (which characterizes hope and interest but not love and gratitude) leads to larger consideration sets and engagement in more effortful environmental actions. I also examine how positive emotions characterized by different lenses, such as perceived control (e.g., pride) and social connection (e.g., love), produce distinct behaviors within the same consumption context (e.g., giving in different ways in response to a fundraising appeal). Five studies demonstrate that positive emotions can be characterized in ways that allow prediction of distinct forms of broadening and specific consumption behaviors.

Since the cognitive ability to process information is limited, people often rely on stereotypes to help them make sense of their social environment. These knowledge structures allow people to utilize past experiences and social learning to infer the characteristics and behaviors of individual group members. Stereotypes provide their holders with scripts, specifying how to interact with members of specific social groups (e.g., what products to choose or avoid and how certain actions may be interpreted). Despite the prevalent use of stereotypes in daily life, little research in consumer behavior has examined the role of stereotypes from this perspective. I propose that consumers use stereotype knowledge to navigate interpersonal interactions through adjusting their self-evaluations and product choices to match the needs of the social situation. My research suggests that both the stereotypes applied to the self and those applied to others have implications for how consumers strategically leverage this socially shared knowledge when interacting with others.

In Essay 1, I examine how consumers use stereotypes to guide their self-evaluations when preparing to interact with someone who may stereotype them. Most interestingly, consumers are selective in what aspects of the stereotype they take on, depending on whether they have more interdependent or independent self-construals. In three studies, I demonstrate that individuals with more interdependent self-construals engage in selective self-stereotyping and that these shifts in self-evaluations are specifically tailored to the preferences and expectations of the interaction partner. However, I find that individuals with more independent self-construals engage in selective counter self-stereotyping in order to distance themselves from the constraints of the stereotype and also to rebuff the expectations of the interaction partner.

Essay 2 examines the various impression management concerns that arise when consumers choose products to share with others. I find that when the consumer has little information regarding his consumption partner, stereotypes related to the consumption partner's social group are used to guide product choices. Whether the chosen products are stereotype consistent or inconsistent depend on the consumer's social goals and the consumption partner's expectations. Across four studies, I take both the perspectives of the consumer making the choice and the consumption partner to examine the various strategies adopted for making joint consumption choices and also to evaluate the interpersonal consequences of these strategies.

Combining prior theory about really-new products with temporal construal theory, I examine how psychological differences in how consumers think about really new products (RNPs) and incrementally new products (INPs) affect consumers' formation of long-term product-purchase intentions and follow through on those intentions. In three field studies, I find that consumers form fewer long-term purchase intentions for RNPs than for INPs. They follow through on those intentions less often for RNPs than INPs and this difference in follow-through grows stronger over time after the measurement of purchase intentions. Consumers declaring intention to purchase INPs are more likely to form implementation intentions than those intending to purchase RNPs. Compared to those intending to acquire INPs, those intending to acquire RNPs are exposed to less new information and their attitude accessibility dissipates more rapidly over time. I discuss the implications of these findings for the launch of really new products and for market research on really new products.

In all of these findings, psychological newness is generally a bad thing for the product marketer. I conclude by identifying future research directions for examining the effect of product psychological newness on earlier stages of the product adoption process (Rogers 2003), where newness might be an advantage under some conditions. Psychological newness can affect consumers' initial efforts to learn about new products, and there are conditions under which newness might facilitate learning and awareness. A framework for product psychological newness' influence on elaboration of new product messages is proposed.

This research investigates the interplay between self-worth and consumption, and explores the substantive phenomenon of trading up. Laboratory experiments were conducted in which participants were led to fail (or not) on an intelligence test, which threatened their feelings of self-worth (or not). Following the failure, participants made consumer choices. Of key interest was whether threatened self-worth would result in more "trading up" - that is, selecting more expensive products or retail stores. Results revealed that compared to consumers whose self-worth was not threatened, threatened consumers demonstrated more self-expressive consumption: trading up when a product portrayed "me" (high on self-relevance), or not trading up when a product portrayed "not me" (low on self-relevance). Self-relevance was operationalized in terms of choice sets (i.e., the choice between two Duke t-shirts vs. two white t-shirts) and individual differences in the tendency to consider material objects part of the self (this was measured via a questionnaire).

This research also examined two hypotheses regarding how consumption could, in turn, affect feelings of self-worth. The first hypothesis stated that negative feelings of self-worth can be immediately repaired via consumer decisions (here, the decision to trade up or not). Indeed, results revealed that among consumers whose feelings of self-worth were threatened, self-expressive consumption repaired negative feelings of self-worth. The second hypothesis stated that positive attachments between possessions and consumers' feelings of self-worth enable consumers to rely on possessions to protect self-worth. To test this, participants wrote about a possession that was important for who they are and how they feel about themselves (participants in a control condition wrote about a possession important to other people for this reason). Results showed that writing about a self-relevant possession before failing a test buffered the impact on feelings of self-worth. This finding was particularly robust for possessions important to consumers' social relationships.

These findings highlight the bright side of the relationship between consumption and self-worth: consumers respond to threats adaptively - sometimes spending more and sometimes spending less - and functionally - by making consumption decisions that repair self-worth and by relying on possessions to protect self-worth.

Central to the explosive growth of the Internet has been the desire

of dispersed buyers and sellers to interact readily and in a manner

hitherto impossible. Underpinning these interactions, auction

pricing mechanisms have enabled Internet transactions in novel ways.

Despite this massive growth and new medium, empirical work in

marketing and economics on auction use in Internet contexts remains

relatively nascent. Accordingly, this dissertation investigates the

role of online auctions; it is composed of three essays.

The first essay, ``Online Auction Demand,'' investigates seller and

buyer interactions via online auction websites, such as eBay. Such

auction sites are among the earliest prominent transaction sites on

the Internet (eBay started in 1995, the same year Internet Explorer

was released) and helped pave the way for e-commerce. Hence, online

auction demand is the first topic considered in my dissertation. The

second essay, ``A Dynamic Model of Sponsored Search Advertising,''

investigates sponsored search advertising auctions, a novel approach

that allocates premium advertising space to advertisers at popular

websites, such as search engines. Because sponsored search

advertising targets buyers in active purchase states, such

advertising venues have grown very rapidly in recent years and have

become a highly topical research domain. These two essays form the

foundation of the empirical research in this dissertation. The third

essay, ``Sponsored Search Auctions: Research Opportunities in

Marketing,'' outlines areas of future inquiry that I intend to

pursue in my research.

Of note, the problems underpinning the two empirical essays exhibits

a common form, that of a two-sided network wherein two parties

interact on a common platform (Rochet and Tirole, 2006). Although

theoretical research on two-sided markets is abundant, this

dissertation focuses on their use in e-commerce and adopts an

empirical orientation. I assume an empirical orientation because I

seek to guide firm behavior with concrete policy recommendations and

offer new insights into the actual behavior of the agents who

interact in these contexts. Although the two empirical essays share

this common feature, they also exhibit notable differences,

including the nature of the auction mechanism itself, the

interactions between the agents, and the dynamic frame of the

problem, thus making the problems distinct. The following abstracts

for these two essays as well as the chapter that describes my future

research serve to summarize these contributions, commonalities and

differences.

Online Auction Demand

With $40B in annual gross merchandise volume, electronic auctions

comprise a substantial and growing sector of the retail economy. For

example, eBay alone generated a gross merchandise volume of $14.4B

during the fourth quarter of 2006. Concurrent with this growth has

been an attendant increase in empirical research on Internet

auctions. However, this literature focuses primarily on the bidder;

I extend this research to consider both seller and bidder behavior

in an integrated system within a two-sided network of the two

parties. This extension of the existing literature enables an

exploration of the implications of the auction house's marketing on

its revenues as well as the nature of bidder and seller interactions

on this platform. In the first essay, I use a unique data set of

Celtic coins online auctions. These data were obtained from an

anonymous firm and include complete bidding and listing histories.

In contrast, most existing research relies only on the observed

website bids. The complete bidding and listing histories provided by

the data afford additional information that illuminates the insights

into bidder and seller behavior such as bidder valuations and seller

costs.

Using these data from the ancient coins category, I estimate a

structural model that integrates both bidder and seller behavior.

Bidders choose coins and sellers list them to maximize their

respective profits. I then develop a Markov Chain Monte Carlo (MCMC)

estimation approach that enables me, via data augmentation, to infer

unobserved bidder and seller characteristics and to account for

heterogeneity in these characteristics. My findings indicate that:

i) bidder valuations are affected by item characteristics (e.g., the

attributes of the coin), seller (e.g. reputation), and auction

characteristics (e.g., the characteristics of the listing); ii)

bidder costs are affected by bidding behavior, such as the recency

of the last purchase and the number of concurrent auctions; and iii)

seller costs are affected by item characteristics and the number of

concurrent listings from the seller (because acquisition costs

evidence increasing marginal values).

Of special interest, the model enables me to compute fee

elasticities, even though no variation in historical fees exists in

these data. I compute fee elasticities by inferring the role of

seller costs in their historical listing decision and then imputing

how an increase in these costs (which arises from more fees) would

affect the seller's subsequent listing behavior. I find that these

implied commission elasticities exceed per-item fee elasticities

because commissions target high value sellers, and hence, commission

reductions enhance their listing likelihood. By targeting commission

reductions to high value sellers, auction house revenues can be

increased by 3.9%. Computing customer value, I find that attrition

of the largest seller would decrease fees paid to the auction house

by $97. Given that the seller paid $127 in fees, competition

offsets only 24% of the fees paid by the seller. In contrast,

competition largely in the form of other bidders offsets 81% of the

$26 loss from buyer attrition. In both events, the auction house

would overvalue its customers by neglecting the effects of

competition.

A Dynamic Model of Sponsored Search Advertising

Sponsored search advertising is ascendant. Jupiter Research reports

that expenditures rose 28% in 2007 to $8.9B and will continue to

rise at a 26% Compound Annual Growth Rate (CAGR), approaching half

the level of television advertising and making sponsored search

advertising one of the major advertising trends affecting the

marketing landscape. Although empirical studies of sponsored search

advertising are ascending, little research exists that explores how

the interactions of various agents (searchers,

advertisers, and the search engine) in keyword

markets affect searcher and advertiser behavior, welfare and search

engine profits. As in the first essay, sponsored search constitutes

a two-sided network. In this case, bidders (advertisers) and

searchers interact on a common platform, the search engine. The

bidder seeks to maximize profits, and the searcher seeks to maximize

utility.

The structural model I propose serves as a foundation to explore

these outcomes and, to my knowledge, is the first structural model

for keyword search. Not only does the model integrate the behavior

of advertisers and searchers, it also accounts for advertisers

competition in a dynamic setting. Prior theoretical research has

assumed a static orientation to the problem whereas prior empirical

research, although dynamic, has focused solely on estimating the

dynamic sales response to a single firm's keyword advertising

expenditures.

To estimate the proposed model, I have developed a two-step Bayesian

estimator for dynamic games. This approach does not rely on

asymptotics and also facilitates a more flexible model

specification.

I fit this model to a proprietary data set provided by an anonymous

search engine. These data include a complete history of consumer

search behavior from the site's web log files and a complete history

of advertiser bidding behavior across all advertisers. In addition,

the data include search engine information, such as keyword pricing

and website design.

With respect to advertisers, I find evidence of dynamic

bidding behavior. Advertiser valuation for clicks on their sponsored

links averages about $0.27. Given the typical $22 retail price of

the software products advertised on the considered search engine,

this figure implies a conversion rate (sales per click) of about

1.2%, well within common estimates of 1-2% (gamedaily.com). With

respect to consumers, I find that frequent clickers place a

greater emphasis on the position of the sponsored advertising link.

I further find that 10% of consumers perform 90% of the clicks.

I then conduct several policy simulations to illustrate the effects

of change in search engine policy. First, I find that the

search engine obtains revenue gains of nearly 1.4% by sharing

individual level information with advertisers and enabling them to

vary their bids by consumer segment. This strategy also improves

advertiser profits by 11% and consumer welfare by 2.9%. Second, I

find that a switch from a first to second price auction results in

truth telling (advertiser bids rise to advertiser valuations), which

is consistent with economic theory. However, the second price

auction has little impact on search engine profits. Third, consumer

search tools lead to a platform revenue increase of 3.7% and an

increase of consumer welfare of 5.6%. However, these tools, by

reducing advertising exposure, lower advertiser profits by 4.1%.

Sponsored Search Auctions: Research Opportunities in Marketing

In the final chapter, I systematically review the literature on

keyword search and propose several promising research directions.

The chapter is organized according to each agent in the search

process, i.e., searchers, advertisers and the search engine, and

reviews the key research issues for each. For each group, I outline

the decision process involved in keyword search. For searchers, this

process involves what to search, where to search, which results to

click, and when to exit the search. For advertisers, this process

involves where to bid, which word or words to bid on, how much to

bid, and how searchers and auction mechanisms moderate these

behaviors. The search engine faces choices on mechanism design,

website design, and how much information to share with its

advertisers and searchers. These choices have implications for

customer lifetime value and the nature of competition among

advertisers. Overall, I provide a number of potential areas of

future research that arise from the decision processes of these

various agents.

Foremost among these potential areas of future research are i) the

role of alternative consumer search strategies for information

acquisition and clicking behavior, ii) the effect of advertiser

placement alternatives on long-term profits, and iii) the measure of

customer lifetime value for search engines. Regarding the first

area, a consumer's search strategy (i.e., sequential search and

non-sequential search) affects which sponsored links are more likely

to be clicked. The search pattern of a consumer is likely to be

affected by the nature of the product (experience product vs. search

product), the design of the website, the dynamic orientation of the

consumer (e.g., myopic or forward-looking), and so on. This search

pattern will, in turn, affect advertisers payments, online traffic,

sales, as well as the search engine's revenue. With respect to the

second area, advertisers must ascertain the economic value of

advertising, conditioned on the slot in which it appears, before

making decisions such as which keywords to bid on and how much to

bid. This area of possible research suggests opportunities to

examine how advertising click-through and the number of impressions

differentially affect the value of appearing in a particular

sponsored slot on a webpage, and how this value is moderated by an

appearance in a non-sponsored slot (i.e., a slot in the organic

search results section). With respect to the third area of future

research, customer value is central to the profitability and

long-term growth of a search engine and affects how the firm should

allocate resources for customer acquisition and retention.

Organization

This dissertation is organized as follows. After this brief

introduction, the essay, ``Online Auction Demand,'' serves as a

basis that introduces some concepts of auctions as two-sided

markets. Next, the second essay, ``A Dynamic Model of Sponsored

Search Advertising,'' extends the first essay by considering a

richer context of bidder competition and consumer choice behavior.

Finally, the concluding chapter, which outlines my future research

interests, considers potential extensions that pertain especially to

sponsored search advertising.

Consumers frequently share stories about consumption experiences with others through word of mouth (WOM). Past research has focused on how hearing WOM influences the listener; I examine how sharing WOM influences the speaker. My proposed model outlines variables that determine storytelling language, predicts how specific language influences speakers' evaluations of experiences, and identifies the process through which language influences speakers. I test this model in five experimental studies and in a field study using Amazon.com data. I find that stories containing relatively more explaining language influence speakers through a process of sense-making. Sense-making helps consumers understand and recover from experiences by allowing them to figure out why experiences occurred and why they liked or disliked them. Making sense of experiences through explaining language has several consequences for consumers. Explaining language can cause paradoxical effects of WOM in terms of consumers' evaluations of experiences and their intentions to repeat and recommend experiences. Explaining positive experiences can decrease speakers' evaluations of experiences, making experiences less positive and decreasing consumers' willingness to repeat and recommend these experiences. Conversely, explaining negative experiences can increase speakers' evaluations of experiences, making experiences less negative and increasing consumers' willingness to repeat and recommend these experiences. In addition, making sense of and explaining experiences decreases consumers' intentions to spread future word of mouth about their experiences.

Search advertising refers to the practice where advertisers place their text-based advertisement on the search engine's result page along with the organic search results. With its growing importance, search advertising has seen a recent surge in academic interest. However, the literature has been ignoring some practical yet important problems of advertisers, including the keyword selection problem. In my dissertation, I focus on the keyword selection problem, more specifically, the choice of branded keywords in search advertising.

My dissertation begins with an observation on different patterns of branded keyword purchase behavior by the brand owner and its competitor. Under some branded keywords, we observe in the sponsored link, only the brand owner or only the competitor. However, under some other branded keywords, we observe both firms, or neither of them. Upon this phenomenon, I aim to understand what drives this puzzling pattern in a competitive environment. To this purpose, I develop a duopoly model where two firms compete in the product market with both horizontally and vertically differentiated products. Their products are evaluated by consumers whose perception is affected by what they see in search advertising. With this setup, Then I derive a subgame perfect equilibrium of the two stage game.

In a pricing equilibrium, I find that any benefit a firm gets from search advertising either due to exposure benefit or due to contrast or assimilation, helps this firm charge higher price while forcing the other firm charge lower price. This result affects the incentive for each firm to buy the branded keyword in the advertising stage. Specifically, firms have an incentive to buy the keyword only when the cost of advertising is justified by the exposure benefit but even in that case, each firm buys only when the detrimental context effect is not present. If the quality difference between the brand owner and the competitor is large and thus there exists a contrast between the two firms, the competitor with low quality product refrains from buying the keyword, because the contrast effect hurts the competitor. On the other hand, if the quality difference is small and thus two brands are assimilated, the brand owner with high quality product refuses to buy the keyword, because it is hurt by the assimilation effect. If the quality difference is in the intermediate range so that neither context effect is harmful to neither firm, both firms buy the keyword at the same time. On probing further the underlying incentives, I find that in some cases, the brand owner may buy its own keyword only to defend itself from the competitor's threat. In contrast, I also identify the case where the brand owner chooses to buy its own keyword and precludes the competitor from buying it. My result also suggests that both firms may be worse off by engaging in advertising, as in the prisoner's dilemma case.

On an extension, I provide an analysis on the impact of the insufficient advertising budget. If the budget is limited, both firms may have an incentive to hurt the other firm taking the higher slot, by increasing the bid amount and thus quickly exhausting the competitor's budget. The budget constraint also deprives the advertisers of the incentive to buy the keyword and thus, the budget-constrained advertisers may refuse to match the competitor's purchase of the keyword. Finally, the experimental investigation shows the existence of the exposure effect and the context effects. It also supports the model prediction based on estimated model parameters together with the empirical observation.

This dissertation focuses on managerial decision making, and specifically explores conditions wherein managers may increase their propensity to escalate commitment towards a failing project. Escalation researchers (e.g. Schmidt and Calantone, 2002) have listed four classes of factors that may impact a manager's propensity to escalate commitment towards a failing project, and have called for research into how exactly these factors impact escalation. In this dissertation, we explore two such factors. The first factor relates to the characteristics of the decision process used by firms to evaluate the project. Here, for example, researchers have looked at whether the manager was also involved in making decisions about the project in a prior period, and Boulding, Morgan and Staelin (1997) have shown that such manager's positive beliefs about the project (formed in a prior period) make a manager more likely to escalate commitment. The second factor relates to project characteristics. Here, for example, researchers have looked at whether or not the project relates to a product that is perceived as new, and Schmidt and Calantone (2002) have shown that managers are more likely to escalate commitment towards a failing project relating to a new product.

The first dissertation essay uses three experiments to examine how a hitherto unexplored characteristic of the decision process might lead to increasing escalation of commitment. Specifically, building off research into the illusion of control, we examine whether the opportunity to use managerial skill during the decision process makes a manager more willing to escalate commitment towards a failing project. We find that whenever managers act on cues that cause them to think they can use their managerial skill to control some outside factor (even though in reality they cannot), managers overestimate their ability to "control the odds" related to this outside factor. Such beliefs feed forward and lead managers to make suboptimal decisions about the overall project.

The second dissertation essay looks at how project characteristics might make a manager more (or less) likely to escalate commitment towards a failing project. We explore this issue in the hitherto unexplored real options setting. Real options have emerged as an important part of marketing strategy, and have been used to structure new product alliances, value customers etc. We run a controlled experiment and we examine whether differences in option-structure (which is a project characteristic) impact the propensity to make suboptimal option-exercise decisions. We find that managers are more likely to make suboptimal option-exercise decisions in the case of put options (vis. call options), and - as predicted by the endowment effect literature - this increased propensity to make a suboptimal decision is mediated by/ explained by the psychological ownership construct.

This dissertation explores how consumers learn from repeated experiences with a product offering. It develops a new Bayesian consumer learning model, the unstable learning model. This model expands on existing models that explore learning when quality is stable, by considering when quality is changing. Further, the dissertation examines situations in which consumers may act as if quality is changing when it is stable or vice versa. This examination proceeds in two essays.

The first essay uses two experiments to examine how consumers learn when product quality is stable or changing. By collecting repeated measures of expectation data and experiences, more information enables estimation to discriminate between stable and unstable learning. The key conclusions are that (1) most consumers act as if quality is unstable, even when it is stable, and (2) consumers respond to the environment they face, adjusting their learning in the correct direction. These conclusions have important implications for the formation and value of brand equity.

Based on the conclusions of this first essay, the second essay develops a choice model of consumer learning when consumers believe quality is changing, even though it is not. A Monte Carlo experiment tests the efficacy of this model versus the standard model. The key conclusion is that both models perform similarly well when the model assumptions match the way consumers actually learn, but with a mismatch the existing model is biased, while the new model continues to perform well. These biases could lead to suboptimal branding decisions.

Though societally-held norms about emotion are an ever-present factor that guide and shape our emotional experiences, little research has examined how these norms might influence our consumption behaviors. In my dissertation, I begin to bridge that gap by examining how emotion norms might encourage individuals to make certain consumption choices in an attempt to achieve or avoid specific emotional states. In particular, I focus specifically on the emotion norm associated with the experience of feeling ashamed to explore how emotion norms can lead us to make some rather unexpected choices. Across a series of studies, I find that the emotion norm associated with shame attenuates consumers' basic hedonic impulses and increases their preference for products that elicit mixed emotions. Importantly, I find that this occurs despite our natural preference for feeling positively and despite the fact that feeling mixed emotions is psychologically uncomfortable and aversive. Taken together, this work extends the existing research on motivated emotion, mixed emotions and emotion norms in (1) suggesting a novel reason for why individuals might seek out one emotional state over another (2) providing an explanation for why mixed emotions-eliciting products might succeed in the marketplace (3) demonstrating that not all negative emotions lead to mood repair behavior and (4) examining how emotion norms as fundamental social structures influence consumption behavior.