Sep 122010
 
California Institute of Technology
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We’ve all heard the predictions: e-commerce is going to be the death of traditional commerce; online shopping spells the end of the neighborhood brick-and-mortar store.

While it’s true that online commerce has had an impact on all types of retail stores, it’s not time to bring out the wrecking ball quite yet, says a team of researchers from the California Institute of Technology (Caltech).

Their investigations into how subjects assign value to consumer goods — and how those values depend on the way in which those goods are presented — are being published in the September issue of the American Economic Review.

The question they address is at the heart of economics and marketing: Does the form in which an item is presented to consumers affect their willingness to pay for it?

Put more simply, says Antonio Rangel, professor of neuroscience and economics at Caltech, “At a restaurant, does it matter whether they simply list the name of the dessert, show a picture of the dessert, or bring the dessert cart around?”

Most behavioral theories assume that the form of the presentation should not matter, notes Caltech graduate student Benjamin Bushong. “Some models suggest that choices amongst objects shouldn’t vary with their descriptions or by the procedure by which the choice is made,” he says. “However, our experiments show that the form in which the items are presented matters a lot. In fact, our research measures in monetary terms just how much those different displays matter.”

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