Research
Working papers
Less is more: The single-use effect in subscriptions Link to paper
Americans spend on average $348 per year on unused subscriptions (Huddleston, 2019). Supported by experimental evidence from 309 subjects, this paper introduces a cognitive bias that explains sub-optimal consumer behavior in the context of subscriptions and insurance. When contrasted against a longer subscription on a binary choice menu, adding free subscription to a single-use option can shift preferences toward the longer option. I show that this dominance violation stems from selective attention. Text analysis of subjects’ open-ended comments suggests that costs per subscribed time period become a focal point for comparison when both subscription alternatives involve time periods. In contrast, a single-use option cues evaluation based on the probability of use. The discrepancy in decision criteria is reflected in the distribution of subjects’ willingness-to-pay for the corresponding short option when contrasted against the price for the long option. This paper outlines a salience model based on Bordalo et al. (2023) generating novel, testable predictions that fit the data. Awareness of this phenomenon can be relevant for regulators seeking to protect consumers from unused subscriptions and insurance.
Time pressure reduces financial bubbles: Evidence from forecasting experiments with M. Anufriev and J. Tuinstra Working paper
From previous laboratory experiments, we know that price bubbles may emerge in asset markets due to participants’ tendency to coordinate on extrapolative expectations. In this paper we investigate whether time pressure, which is relevant for many decisions on financial markets, exacerbates or mitigates these bubbles. With increasing time pressure, we find that price volatility decreases and prices tend to converge faster to their fundamental value. This is due to participants using simpler, adaptive forecasting strategies under high time pressure. In addition, substantially increasing the number of decision periods in our experiment allows us to study whether the bubbles and crashes emerging under low time pressure are persistent. We find that, in the long run, prices typically converge to their fundamental value. This can be explained by participants eventually switching from extrapolative to adaptive forecasting strategies.
Work in progress
Memory and salience with N. Gennaioli
This project addresses well-known economic phenomena, such as the four-fold pattern of choice under uncertainty, the description-experience gap (Hertwig and Erev, 2009), belief-preference inconsistencies, and the risk-ambiguity discrepancy (Abdellaoui, Baillon, Placido, and Wakker; 2011). Recognizing the limitations of existing behavioral choice theories in accommodating these diverse phenomena, we turn to insights from human memory principles (Kahana, 2012). We investigate how the interplay between memory retrieval and the salience of choice parameters affects attention in uncertain decision contexts and, consequently, economic choices. Utilizing incentive-compatible experiments, we rigorously examine these paradoxical phenomena within a unifying framework. Our investigation aims to provide a more comprehensive understanding of decision-making processes and contribute valuable insights to the field of behavioral economics.
Social norms and consumer behavior with G. Atzeni and M. Vannini
As part of the EU pilot project SheepToShip LIFE aiming to reduce greenhouse gas emissions from the Sardinian sheep farming sector and dairy supply chain by 20% in 10 years, we examine the potential of social norms to alter consumption choices in favor of low-emission products.
Publications
Bernasconi, M. and Neunhoeffer, F. (2023). "The income inequality trap: When redistributive preferences do not correct greater inequality, Journal of Behavioral and Experimental Economics (forthcoming) Full paper
In a lab study, we examine how preferences for redistribution are affected by income inequality, uncertainty of income class, income mobility, and the source of income (random or effort based). Under income class uncertainty we discover an inequality trap where individuals exposed to a more unequal pre-tax distribution also demonstrate greater acceptance of post-tax inequality. This effect is particularly pronounced in the effort condition and with low mobility. However, as individuals become aware of their true economic positions, the conflict between the poor and the rich intensifies, decreasing tolerance for inequality. These findings indicate that traditional rational-expectations models which solely rely on risk aversion and inequality aversion cannot fully explain subjects’ redistributive preferences. We also consider other factors, such as fairness considerations, social class memberships, and overconfidence in income expectations as potential drivers.
Neunhoeffer, F. and Teubner, T. (2018). "Between enthusiasm and refusal: A cluster analysis on consumer types and attitudes towards peer-to-peer sharing." Journal of Consumer Behavior 17(2):221-36 Full paper Paper video by TU Berlin students
The rise of peer‐to‐peer platforms for sharing private resources has introduced new possibilities for access beyond ownership. Although experiencing fast growth, the academic literature has only recently begun to study individual user attitudes towards such new forms of consumption. Building on findings on the underlying consumer motives for peer‐to‐peer sharing, this study differentiates prototypical consumers by means of cluster analysis. Based on data from a large‐scale online survey (n = 745) on consumer motives, we identify 5 main dimensions (concerns, benefits, product‐specific aspects, social aspects, and ownership‐related aspects). On these grounds, we identify 4 consumer types with distinct demographic and attitudinal characteristics: Social Enthusiasts, Conflicted Materialists, Skeptic Ascetics, and Individualistic Refuseniks. Based on these clusters' differences with regard to demographics and sharing behaviors, we derive implications for practitioners to tailor their business models and marketing strategies to the specific motivational patterns of the respective user groups.