Second authorship is shared equally by Chen and Dasgupta. The authors thank the Power Information Network, an affiliate of J.D. Power and Associates, for the data used in this study. They are also grateful to Akshay Rao for his helpful comments. Financial support from the Social Sciences and Humanities Research Council of Canada is gratefully acknowledged. Dilip Soman served as associate editor for this article. RUI (JULIET) ZHU, XINLEI (JACK) CHEN, and SRABANA DASGUPTA*When consumers decide to upgrade to a new or better product, they often trade in their currently owned or used product for the new one. The authors examine whether such trade-in behavior, in which consumers must negotiate the price for both the new and the used product, affects their willingness-to-pay price for the new good. Drawing on research on mental accounting, the authors reason that when consumers engage in a transaction involving a trade-in (i.e., when they act as both buyer and seller simultaneously), they place more importance on getting a good value for the used product than on getting a good price for the new product. As a result, such consumers exhibit a higher willingness-to-pay price for the new product than consumers who just buy the new product alone. The results from a series of laboratory experiments provide systematic support for this hypothesis. Finally, the authors lend external validity to their results by confirming the hypothesis using real-world transaction data from the automobile market.

By treating leasing and financing contracts as differentiated products with their own unique acquisition costs, the authors develop a structural model of a consumer's choice of automobile and the related decision of whether to lease or buy it. They estimate the model on a data set of new car purchases from the entry-luxury segment of the U.S. automobile market. A key finding is that consumers are myopic and prefer contracts with lower payment streams even when they have higher total costs. The authors also find that consumers are more likely to lease than to finance cars with higher maintenance costs because this provides them with the option to return the car before maintenance costs become too high. The authors demonstrate how automobile manufacturers can use the model to evaluate the effectiveness of promotional incentives, such as cash rebates, interest rate subsidies, and increased residual values.

Although managers’ perceptions are core to the Performance Feedback Theory, few empirical studies measure managerial perceptions of their organization’s performance and theorize on the (in)consistency between perceptual and objective performance feedback. Based on longitudinal survey data of Canadian organizations, we examine how this (in)consistency affects the propensity for innovation in organizations. Our analysis broadly validates that inconsistency between the two types of feedback it dampens innovation. Second, positive perceptions strengthen the relationship between positive objective performance feedback and innovation, leading to increased innovation, whereas negative perceptions strengthen the relationship between negative performance feedback and innovation, echoing the problemistic search hypothesis. We also find that perceptions moderate the effect of objective performance feedback differently in the social and historical dimensions as well above and below the aspiration thresholds.

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Many large ticket items, such as cars and real estate, involve extensive bargaining on the part of consumers. From a consumer protection perspective, it is thus important to understand the determinants of bargaining outcomes and identify ways in which consumers can improve their bargaining performance. This research identifies several situational factors, including the information available to the consumer, the promotional environment, and a customer's trade-in, that may have an impact on the bargaining outcome. A unique dataset is created from the US automobile market that combines actual vehicle transaction data with survey data on buyer search and bargaining behaviour. The results show that these situational variables indeed have an impact on the price a consumer pays. Specifically, on average, consumers who used the Internet and those that were offered a manufacturer rebate saved $481 and $2,126, respectively, while consumers who traded-in their old vehicle ended up paying $159 more on the new car compared to consumers who did not trade-in. Interestingly, the impact of some of these situational variables differed depending on the consumers' ability to bargain and their enjoyment of bargaining. For example, high ability bargainers achieved more price reductions than low ability bargainers, given more information and a more active promotional environment, but this advantage did not extend in overcoming the negative impact of a trade-in. On the other hand, while buyers who enjoy bargaining do not possess a better position in a bargaining situation, they have greater tendency to search for price information and thus are better at identifying suppliers that offer a lower initial price. From a policy perspective, these results suggest that information search should J Consum Policy (2012) 35:255-274