Faculty Research Brief: August 2011
Featured Research
Low-Status Consumers Can Be Important Trend-Setters Too!
Vicki Morwitz, Harvey Golub Professor of Business Leadership, and Edith Shalev (PhD '10) of the Technion Israel Institute of Technology explore how consumers influence one another in their recent paper, “Influence via Comparison-Driven Self Evaluation and Restoration: The Case of the Low-Status Influencer.” Consumer product companies frequently recruit “influentials,” including celebrities, models and high-status consumers, for their marketing campaigns. The authors of this study identify a new and surprising type of “influential:” consumers with low socio-economic status. Pointing to a new type of social influence process, Comparison-Driven Self Evaluation and Restoration (CDSER), the researchers examine how viewing a low-status consumer with a desirable possession can diminish one’s self evaluation, and in turn, affect one's emotions or behaviors. For example, a consumer who observes the office janitor using the latest high-tech gadget may infer that people, in general, are more tech saavy than before. The observer may then conclude that he/she needs to restore a high-tech self image and may therefore purchase the same gadget. After several experiments, the authors identify situations when a low-status user can positively affect an observer’s purchase intentions. Those who learned about a low-, rather than a high-status user, were more likely to buy desirable products like high-tech products and sophisticated clothing. The authors explain why CDSER influence arises and what its likely outcomes are; who is most susceptible to CDSER influence; by whom are observers most likely to be influenced; and which types of products are likely to instigate CDSER influence. Implementation of these findings may prove challenging, according to the authors, because a brand’s image might become less “glamorous” if low-status users become a primary segment. However, the authors argue that firms should consider harnessing low-status users to market brands in relatively mature stages of their product lifecycle, when the brand image has been clearly established. The paper has been accepted for publication at the Journal of Consumer Research.
The Consequences of Electric Power Outages
Jeffrey Simonoff, Toyota Motor Corporation Term Professor of Statistics, along with co-authors Carlos Restrepo and Rae Zimmerman of NYU’s Wagner Graduate School of Public Service examine the consequences of electric power outages in their paper entitled, “Risk-Management and Risk-Analysis-Based Decision Tools for Attacks on Electric Power.” The authors studied data on incidents in the US and Canada from 1990-2004 to gain a better understanding of how power disturbances varied over time and by season, and to analyze how outcomes, such as the number of customers who lost power and outage duration, are related to different characteristics of the outages themselves. The researchers produced multiple models which can be used to estimate potential outcomes of electric power outages, including risks, consequences and costs. The paper was selected to be part of a special 2011 issue of the journal Risk Analysis about advances in terrorism risk analysis.
Detecting and Reacting to Change: The Effect of Exposure to Narrow Categorizations
Amitav Chakravarti, Associate Professor of Marketing; Christina Fang, Associate Professor of Management and Organizations; and Zur Shapira, Chair, Management and Organizations, and Professor of Entrepreneurship and Management, examine the factors that affect people’s reactions to change. In their study, they observe a novel effect: decision makers’ reactions to change (e.g., a visual change or technology change) were systematically affected by the type of categorizations they encountered in an unrelated prior task (for example, the response categories associated with a survey question). They found that prior exposure to narrow, as opposed to broad, categorizations improved decision makers’ ability to detect change and led to stronger reactions to a given change. These different reactions occurred because even though the prior categorizations were unrelated, they altered the extent to which the subsequently-presented change was perceived as a relatively large or relatively small change. Their findings imply that unrelated, real-world factors that decision makers encounter (for example, the organization of retail stores, categorizations in online portals or the response choices on surveys) might systematically affect their detection of and reactions to change. The paper has been accepted for publication in the Journal of Experimental Psychology: Learning, Memory and Cognition.
Deriving the Pricing Power of Product Features by Mining Customer Product Reviews
Anindya Ghose, Associate Professor of Information, Operations and Management Sciences; Panos Ipeirotis, Associate Professor of Information, Operations and Management Sciences; and PhD student Nikolay Archak examine user-generated online product reviews and present the first paper to demonstrate the need to use textual content in assessing the impact of customer reviews on product sales. While the existing literature generally assesses the impact of product reviews on sales based on numeric variables representing the valence (numerical customer rating) and volume of reviews, the authors assert that the information embedded in product reviews cannot be captured by a single quantitative value. They argue that product reviews are multifaceted; therefore the textual, qualitative content of product reviews is an important determinant of consumers’ choices, over and above the valence and volume of reviews. The authors use text mining to incorporate review text in a consumer choice model, demonstrating how textual data can be used to learn consumers’ relative preferences for different product features and also how text can be used for predictive modeling of future changes in sales. This paper makes path-breaking methodological contributions to the area of monetization of social media content that is being tackled by researchers from a variety of fields such as economics, marketing, information systems and computer science.
“Focus! Creative Success is Enjoyed Through Restricted Choice”
Visiting Professor of Marketing Anne-Laure Sellier and Darren Dahl of the University of British Columbia examine how the number of creative inputs (e.g., ingredients for a cooking project or paint colors for an art project) that an experienced versus inexperienced consumer can choose from influences both the perception of his/her own creativity and the creative output. The co-authors find that a restricted number of choices increases enjoyment and objective creativity among experienced consumers, but generally decreases subjective creativity ratings made by those consumers. In other words, consumers with experience in a creative task seem to enjoy the task more and are objectively more creative when they have a constrained choice of inputs. That said, those same experienced consumers generally rate the outcome as less creative when given a restricted number of creative inputs. According to the research, consumers have difficulty focusing when they are faced with extensive creative input options. Anxiety and potential decision paralysis over creative inputs likely result in less focus and reduced task enjoyment, which has negative implications for the creative outcomes produced by consumers. This effect, however, is not seen in inexperienced consumers whose lack of domain-relevant knowledge and ability make them unlikely to be sensitive to changes in the input choice set. The authors point to the relevance of this research in managing artistic teams to optimize creative output and in developing public policy. “Governments looking to spur green consumer behavior by making consumers more creative in their use of products may want to limit choice in the first place,” says Professor Sellier. The paper is forthcoming in the Journal of Marketing Research.
Awards, Accolades and Presentations
Assistant Professor of Finance Ashwini Agrawal received the Review of Financial Studies' Young Researcher Prize of $5,000 for his paper entitled, “Corporate Governance Objectives of Labor Union Shareholders: Evidence from Proxy Voting,” at the Western Finance Association meetings in Santa Fe, New Mexico, in June. The paper examines the motives and effects of labor union pension funds, the most vocal class of shareholder activists in the US. In contrast to claims that these activists use their equity ownership to maximize shareholder value, he finds evidence that union funds use their holdings to pursue worker objectives, to the detriment of other shareholders.
Natalia Levina, Associate Professor of Information, Operations and Management Sciences, and Anne-Laure Fayard from NYU's Polytechnic Institute, were awarded a $398,314 grant from the National Science Foundation based on the Virtual Organizations and Sociotechnical Systems program for research on open innovation and crowdsourcing. The three-year grant to NYU Professors Levina and Fayard, along with their collaborator Karim Lakhani of Harvard Business School, will provide funding for their research, “Open Innovation Intermediaries: Brokering Technology and the Wisdom of the Crowds.”
Associate Professor of Management and Organizations Robert Salomon spoke at an event on “Commodity Inflation: How to Understand and Manage the Risk,” on August 10 for the CEO Trust, a members-only organization consisting of CEOs in the NYC area. Professor Salomon’s remarks centered around global commodity inflation, its impact on consumers and firms, and the likelihood of inflation spillover to the broader US economy.
Clinical Assistant Professor of Management Communication Susan Stehlik and Clinical Associate Professor of Management Communication Aline Wolff delivered a presentation on August 19 on innovative thinking techniques and experiential learning to support corporate brand promise and reputation management. This talk was given during “Necessary Conversations on the 21st Century Company,” the first in a series of leadership sessions bringing together academics, executives and students to discuss the challenges facing today's global markets. The event was organized by Training Vision, a Singapore-based training company.
Four faculty members received “Great Professor” recognitions at Stern’s graduation ceremony for the Executive MBA Class of 2011, held on July 30. Aaron Tenenbein, Faculty Director of Executive MBA Programs and Professor of Statistics, and Holger Mueller, Professor of Finance and Bank and Financial Analysts Faculty Fellow, were voted “Great Professors” by the Class of January 2011. Rohit Deo, Associate Dean of Academic Affairs in Stern's Undergraduate College, Professor of Statistics and Operations Research, and the Robert Miller Faculty Fellow; and Glenn Okun, Clinical Professor of Management and Entrepreneurship and Professor of Management Practice, received the “Great Professor” recognition from the Class of August 2011.
PhD student Tingting Fan won a $2,500 dissertation competition award during the inaugural Product Development Management Association-University of Illinois at Chicago Doctoral Consortium. Fan was among 3 out of 20 students who received the award after a two-round, speed-funding competition.