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Consumers Will Pay More for Goods They Can Touch
Achievement/Results
Integrative Graduate Education and Research Traineeship (IGERT) graduate student, Ben Bushong, and California Institute of Technology Professors, Antonio Rangel and Colin Camerer, have discovered that the form in which a good is presented to consumers has a dramatic effect on their willingness to pay for it. Their research promises to both better understand a fundamental issue in economics and marketing and also provides important lessons for such diverse social issues as how diets are undermined and how some marketing may lead to us overspend on goods. A central question in economics and marketing concerns whether the form in which an item is presented to consumers affect their willingness to pay for it. Most economic theories assume that the form of the presentation should not matter. With the rise of online commerce, for example, does the fact that consumers do not see the actual goods, but only images of them, influence their willingness to pay for those goods? At a restaurant, does it matter whether a menu simply lists the name of the dessert, show a picture of it, or bring the dessert cart around? To address these questions, the Caltech team presented food to subjects in three different forms: in a text-only format; in a photograph; and in a tray placed in front of the subjects. Then they measured their willingness to pay for the food. They found that there was no difference between the values subjects put on the food depicted in the text and in the picture. However, subjects were willing to pay an average of 50 percent more for food that was directly in front of them. Since one possibility was that the food cued other senses besides vision, such as smell, the team next investigated whether the same increased willingness to pay would hold for other kinds of goods, such as small gift items. The team found that subjects were willing to pay 50 percent more for these goods as well, suggesting this is a general response to goods that are nearby.
What accounts for this striking increased willingness to pay for nearby goods? The team hypothesized that this behavior was driven by a system in the brain referred to as the Pavlovian system. This system links salient features of one’s environment with motor programs that either initiate approach or avoidance programs. Behavioral neuroscience has accumulated evidence that when an appetizing item is presented to both human and non-human animals motor programs initiate that lead to making contact with that item and consuming it. This occurs largely independently of our goals, such as dieting, which has led to the notion that Pavlovian responses may often undermine our longer-term goals. To test this hypothesis, the team next placed a plexiglass barrier between subjects and the good for sale. Their prediction was that this barrier would inhibit the Pavlovian response, since subjects would have no way to physically make contact with the good. Once the possibility of physical contact with the item had been removed, the value subjects gave to that item dropped to the same level as the text- and picture-based items. These results indicate that the value consumers attach to goods is strikingly context dependent, with the form of presentation having dramatic effects on consumers’ willingness to pay.
Address Goals
This research advances the frontiers of knowledge at the intersection of economics and neuroscience. Traditionally, economic understanding of consumer behavior has been dominated by ‘as-if’ thinking with little reference to the actual psychological and neural mechanisms underpinning consumer behavior. Paradigmatic of this tradition is the assumption that valuation of goods is not dependent on the form in which goods are presented to consumers. This research indicates that this assumption is not well-founded by linking consumer behavior to neural subsystems that have been well-studied in behavioral neuroscience and computational neuroscience. This approach promises to be tranformative in terms of the science of consumer decision-making.
This research also promises to expand the scientific literacy of citizens by providing important insights into their own consumer behavior. In addition, it provides insights into a central social problem: why it is so difficult to adhere to long-term goals, such as those involving diet and health. Understanding the interaction between two neural systems, the goal and Pavlovian systems, promises to provide lessons for how we can more effectively regulate our long-term, goal-directed behavior.
