Why budgets backfire
Common sense--not to mention financial advisers--will tell you to adopt spending targets or limits when looking to buy something. Don’t buy it. New research finds that such thinking can backfire. People who were first asked how much they planned to spend on a product went on to choose a more expensive product than if they hadn’t thought about how much they would spend. This happens because, after narrowing their focus to acceptably priced options, consumers seem to leave price considerations behind and focus more exclusively on quality differences, which are magnified in the context of the consumer’s narrow focus. Thus, the consumer is more likely to choose the higher-quality but higher-priced option.
Larson, J. & Hamilton, R., “When Budgeting Backfires: How Self-Imposed Price Restraints Can Increase Spending,” Journal of Marketing Research (forthcoming).
Give when it hurts
Social scientists, politicians, and charities spend a lot of time trying to understand what makes people contribute to a cause. A new study has found an intriguing answer: pain. In several experiments, people were more willing to donate money to benefit victims of tragedy if the prospective fund-raiser took the form of a long-distance run, rather than a picnic. And it wasn’t only charitable causes that benefited from pain. When people were deciding how much of their own money to contribute to a group investment, they contributed significantly more to the group when told that their contribution also required immersing their hands in very cold water for a minute. More than twice as many people contributed all their money to the group in the cold-water situation and, as a result, earned higher total payoffs in the end.
Olivola, C. & Shafir, E., “The Martyrdom Effect: When Pain and Effort Increase Prosocial Contributions,” Journal of Behavioral Decision Making (forthcoming).
The peril of added value
These days, we all have to sell or market something, even if it’s just ourselves. This requires presentation skills. But researchers have discovered a major disconnect between presenters and evaluators. Presenters rationally assume that evaluators add up the value of the components of the presentation to determine its overall value. In fact, however, evaluators often adopt a holistic perspective that instead averages the value of the components. This disconnect leads to counterintuitive results. When given the option of marketing a product by itself or bundled with a lower-value amenity, most people chose to bundle them. Yet prospective consumers judged the bundle to be worth less. The same thing happened in marketing negative bundles (i.e., penalties). Government employees who were given the option of penalizing littering with a $750 fine by itself or in combination with two hours of community service chose the latter, thinking the two together would be a more discouraging punishment, but prospective litterers judged the combination to be less severe.
Weaver, K. et al., “The Presenter’s Paradox,” Journal of Consumer Research (forthcoming).
Why your boss overreaches
Most of us have heard that absolute power corrupts absolutely. But, according to new research, power does more than corrupt; it makes us overconfident. After writing about an experience of having power, people were more confident in their answers and predictions--specifically, they gave themselves smaller margins of error--than people who wrote about having little power. In addition, people who reported having power at work subsequently bet more on difficult trivia questions--before even seeing the questions--and, as a result, lost more money.
Fast, N. et al., “Power and Overconfident Decision-Making,” Organizational Behavior and Human Decision Processes (forthcoming).
A strike against unilateral divorce
When it comes to marriage policy, same-sex marriage has gotten most of the attention in recent years, but there has also been some grumbling from social conservatives about unilateral divorce, or the right of one spouse to divorce without the consent of the other. While the verdict is still out on the impact of unilateral divorce overall, a recent analysis did uncover a correlation between unilateral divorce and crime. During the first two decades after a state adopted a unilateral divorce law, violent crime and arrest rates increased, especially for those who were children when the law changed. Adoption of a unilateral divorce law was also associated with less educated mothers not having a husband present and dropping below the poverty line, which the researchers say suggests that the shift to unilateral divorce “surprised” and destabilized less affluent families.
Cáceres-Delpiano, J. & Giolito, E., “The Impact of Unilateral Divorce on Crime,” Journal of Labor Economics (January 2012).
Note to readers: Recently it was discovered that Dutch psychologist Diederik Stapel had faked data in multiple studies, including a study concluding that disordered environments increased racism. That study was published by the journal Science and reported in this column on April 24 of last year. Last month, it was retracted; a full review of Stapel’s work is currently underway at Dutch universities. While this kind of fraud is (hopefully) rare, readers of this column should bear in mind that the studies reported herein are provisional, and like all scientific findings may be questioned or confirmed by further research.