How does the preference for increasing payments depend on the size and source of the payments?

Duffy, Sean; Smith, John; Woods, Kristen

doi:10.5267/j.msl.2015.10.007

Cited by 5 publications

(5 citation statements)

References 7 publications

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“…The perceived relative difference between the two discount components leads to biased consumer assessment and purchase intention. Our findings build on and extend previous work on price framing and reference effects (e.g., Ariely, Loewenstein, & Prelec, ; Duffy, Smith, & Woods, ; Haisley & Loewenstein, ; Peine, Wentzel, & Herrmann, ; Suri, Monroe, & Koc, ).…”

Section: Introductionsupporting

confidence: 87%

“…When targets are evaluated in succession, the initial information sets the benchmark for subsequent evaluations (Damisch, Mussweiler, & Plessner, ). Decision‐making research shows that consumers construct preferences and form attitudes based on the perceived trend conveyed in the sequence through which information is processed (Ariely & Zauberman, ; Duffy et al., ). For instance, Haisley and Loewenstein () corroborated that ascending sequences of gift value triggered gratitude and indebtedness.…”

Section: Theoretical Backgroundmentioning

confidence: 99%

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The Illusion of Double‐Discount: Using Reference Points in Promotion Framing

2019

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Double-discount is an effective format for promoting purchase decisions. However, extant literature has overlooked how temporal order of discounts applied affects consumers' purchase decisions. In this paper, we show that the sequence of discount magnitude (e.g., 10% followed by 40% vs. 40% followed by 10%) leads to biases in consumer judgment and influences the perceived appeal and purchase intention of the deal. We term this the double-discount sequence effect. Using four experiments, we showed that double-discount in an ascending sequence (e.g., taking 10% off, then an additional 40% off) is preferable over that in a descending sequence. We also found that discount application sequence-but not the presentation order-matters to consumers. Consumers anchor on the first discount they encounter and evaluate the second discount with respect to this first one.

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Section: Introductionsupporting

confidence: 87%

Section: Theoretical Backgroundmentioning

confidence: 99%

The Illusion of Double‐Discount: Using Reference Points in Promotion Framing

2019

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“…Studies involving different methods (for example, differences in the number of outcomes in the sequence, whether outcomes were hypothetical or real, or whether participants' ratings involve prospective evaluations before they experience the sequence or retrospective evaluations of sequences they have already experienced) have documented preference for improving sequences across a wide variety of outcomes including money (e.g., Duffy et al, 2015;Magen et al, 2008), pain (e.g., Ariely & Carmon, 2000), annoying sounds (e.g., Ariely & Zauberman, 2000), restaurant meals (e.g., Loewenstein & Prelec, 1991, 1993, health outcomes (e.g., Chapman, 1996Chapman, , 2000, affective stimuli (e.g., Drolet et al, 2011), and news (e.g., Legg & Sweeny, 2014;Marshall & Kidd, 1981).…”

mentioning

confidence: 99%

Save the best for last I: Young adults demonstrate negative time preference—A replication and extension.

Castillo¹,

Sun²,

Frank‐Crawford³

et al. 2022

Behavior Analysis: Research and Practice

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Generally, immediate outcomes are preferred to delayed outcomes, and in economics, this phenomenon is referred to as positive time preference. If positive time preference is normative, when asked to schedule a set of outcomes, a person should typically prefer a worsening sequence (i.e., choose to start with the best outcome and end with the worst outcome). Several studies have shown that when a choice is among a sequence of outcomes, people typically exhibit negative time preference (i.e., they prefer an improving series of events). In the current studies, college students responded to hypothetical questions via an online survey. Study 1a was a replication and extension of procedures described by Loewenstein and Prelec (1991, Section II). Response patterns like those of Loewenstein and Prelec were observed in that the percentage of participants who saved the best for last decreased when the interval between activities in the sequence increased. In Study 1b, participants were surveyed about their preference for the order in which they would experience hypothetical outcomes with sequences of different sizes (e.g., three activities to sequence or eight). As array size increased, the percentage of participants who saved the best for last, or generated a perfectly improving sequence, decreased. In Study 2, 192 college students responded to questions involving categorically different outcomes (e.g., noxious stimuli, food, exercise, schoolwork, leisure) via an online survey. A smaller percentage of participants saved the best for last relative to prior studies, but the percentage was highest when sequences involved noxious stimuli or food.

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“… Loewenstein and Sicherman (1991) used large amounts of money, labeled the money, that is, specified its origin (wage payments or rental income), and presented the sequences using column charts to museum visitors, whereas Manzini et al (2010) and Gigliotti and Sopher (1997) used small amounts of money, did not label the money, and presented sequences using delay-by-payoff matrices to college students. It is not entirely clear which methodological differences are responsible for the opposite results, but preference for increasing sequences is more pronounced for larger amounts of money ( Duffy & Smith, 2013 ), more pronounced for income from labor than for income from rent ( Loewenstein & Sicherman, 1991 ) and income from lotteries ( Duffy & Smith, 2013 ; Duffy, Smith, & Woods, 2015 ), perhaps because people expect wages to increase over time ( Chapman, 1996 ), and more pronounced among naïve people than among (financially) sophisticated people ( Guyse, Keller, & Eppel, 2002 ; Loewenstein & Sicherman, 1991 ; Matsumoto, Peecher, & Rich, 2000 ). In any case, the sequences model is very general, in that it allows individuals to either like or dislike improvement, and either like or dislike spreading, so we will give it maximum latitude.…”

Section: Models Of Preferences For Sequencesmentioning

confidence: 99%

Cumulative weighing of time in intertemporal tradeoffs.

Scholten

Read

Sanborn

2016

Journal of Experimental Psychology: General

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We examine preferences for sequences of delayed monetary gains. In the experimental literature, two prominent models have been advanced as psychological descriptions of preferences for sequences. In one model, the instantaneous utilities of the outcomes in a sequence are discounted as a function of their delays, and assembled into a discounted utility of the sequence. In the other model, the accumulated utility of the outcomes in a sequence is considered along with utility or disutility from improvement in outcome utilities and utility or disutility from the spreading of outcome utilities. Drawing on three threads of evidence concerning preferences for sequences of monetary gains, we propose that the accumulated utility of the outcomes in a sequence is traded off against the duration of utility accumulation. In our first experiment, aggregate choice behavior provides qualitative support for the tradeoff model. In three subsequent experiments, one of which incentivized, disaggregate choice behavior provides quantitative support for the tradeoff model in Bayesian model contests. One thread of evidence motivating the tradeoff model is that, when, in the choice between two single dated outcomes, it is conveyed that receiving less sooner means receiving nothing later, preference for receiving more later increases, but when it is conveyed that receiving more later means receiving nothing sooner, preference is left unchanged. Our results show that this asymmetric hidden-zero effect is indeed driven by those supporting the tradeoff model. The tradeoff model also accommodates all remaining evidence on preferences for sequences of monetary gains.

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How does the preference for increasing payments depend on the size and source of the payments?

Cited by 5 publications

References 7 publications

The Illusion of Double‐Discount: Using Reference Points in Promotion Framing

The Illusion of Double‐Discount: Using Reference Points in Promotion Framing

Save the best for last I: Young adults demonstrate negative time preference—A replication and extension.

Cumulative weighing of time in intertemporal tradeoffs.

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