The extensive literature on voter turnout has devoted relatively little attention to the hypothes... more The extensive literature on voter turnout has devoted relatively little attention to the hypothesis that casting a ballot in one election increases one's propensity to go to the polls in the future. This hypothesis is supported by voter turnout patterns in the 1972-4-6 and 1992-4-6 American National Election Studies panel surveys as well as published experimental research. The effects of past voter turnout on current voting propensities are sizeable and robust across a wide range of model specifications, including those that take into account the possibility of stable unobserved factors affecting both past and current turnout. We conclude by discussing the implications of consuetude for political and social behavior.
Habit is a frequently mentioned but understudied cause of political action. This article provides... more Habit is a frequently mentioned but understudied cause of political action. This article provides the first direct test of the hypothesis that casting a ballot in one election increases one's propensity to go to the polls in the future. A field experiment involving 25,200 registered voters was conducted prior to the November general election of 1998. Subjects were randomly assigned to treatment conditions in which they were urged to vote through direct mail or face-to-face canvassing. Compared to a control group that received no contact, the treatment groups were significantly more likely to vote in 1998. The treatment groups were also significantly more likely to vote in local elections held in November of 1999. After deriving a statistical estimator to isolate the effect of habit, we find that, ceteris paribus, voting in one election substantially increases the likelihood of voting in the future. Indeed, the influence of past voting exceeds the effects of age and education reported in previous studies.
The extensive literature on voter turnout has devoted relatively little attention to the hypothes... more The extensive literature on voter turnout has devoted relatively little attention to the hypothesis that casting a ballot in one election increases one's propensity to go to the polls in the future. This hypothesis is supported by voter turnout patterns in the 1972-4-6 and 1992-4-6 American National Election Studies panel surveys as well as published experimental research. The effects of past voter turnout on current voting propensities are sizeable and robust across a wide range of model specifications, including those that take into account the possibility of stable unobserved factors affecting both past and current turnout. We conclude by discussing the implications of consuetude for political and social behavior.
We present an empirical study of spatial competition and a methodology to estimate demand for pro... more We present an empirical study of spatial competition and a methodology to estimate demand for products with unobservable characteristics. Using panel data, we estimate a discrete choice model with latent product attributes and unobserved heterogenous consumer preferences. Our application of the methodology to the network television industry yields estimates that are consistent with experts' views. Given our estimates, we compute Nash equilibria of a product location game, and find that firms' observed strategies (such as the degree of product differentiation) are generally optimal. Discrepancies between actual and optimal strategies reflect the networks' adherence to "rules of thumb," and possibly, bounded rationality behavior.
This paper examines a mechanism that underlies both the political business cycle and the cycle in... more This paper examines a mechanism that underlies both the political business cycle and the cycle in non-economic policies executed by politicians. We show that if rational voters suffer from forgetfulness (a noise in the memory). then government expenditure on the production of public good increases as elections approach. Hence, the model describes a cycle that is observed in the government expenditures of democratic societies. Unlike previous models, this model does not require that the government have information superiority over rational voters with respect to its competency. According to this model, incumbents transfer resources from the beginning of their terms of service and use them near the end of their terms. We also find that the less concave the production function, the wider the cycle.
This study shows theoretically and empirically that exposure to advertising increases consumers' ... more This study shows theoretically and empirically that exposure to advertising increases consumers' tendency to purchase the promoted product because the informative content of advertising resolves some of the uncertainty that the risk averse consumers face and thus reduces the risk associated with the product. We call this effect the "risk-reduction" role of advertising. The risk-reduction model implies that advertising effectiveness depends on (a) the risk preference parameter, (b) the precision of the advertising message, (c) the familiarity of the consumer with the product, (d) the consumer's sensitivity to products' attributes (and thus, her involvement level with the product), and (e) the diversity of products offered by multiproduct firms. These findings suggest that ads spending should be higher (a) for new and relatively unknown products, (b) for high-involvement products, (c) when ads can be quite precise, and (d) when the firm offers a diverse product-line. It also implies that ads should target consumers (a) who are more sensitive to risk, (b) who are more involved, and (c) those who are not familiar with the promoted product.
This study shows theoretically and empirically that exposure to advertising increases consumers’ ... more This study shows theoretically and empirically that exposure to advertising increases consumers’ tendency to purchase the promoted product because the informative content of advertising resolves some of the uncertainty that the risk averse consumers face and thus reduces the risk associated with the product. We call this effect the “risk-reduction” role of advertising. The risk-reduction model implies that advertising effectiveness depends on (a) the risk preference parameter, (b) the precision of the advertising message, (c) the familiarity of the consumer with the product, (d) the consumer’s sensitivity to products’ attributes (and thus, her involvement level with the product), and (e) the diversity of products offered by multiproduct firms. These findings suggest that ads spending should be higher (a) for new and relatively unknown products, (b) for high-involvement products, (c) when ads can be quite precise, and (d) when the firm offers a diverse product-line. It also implies that ads should target consumers (a) who are more sensitive to risk, (b) who are more involved, and (c) those who are not familiar with the promoted product. The model allows ads to affect choices also through a direct effect on the utility (i.e., the standard approach to formulate the effect of advertising). In our empirical example (where the products are television shows) the risk-reduction effect is significant and strong and the direct effect is negligible behaviorally. We discuss the welfare implications of these findings, and illustrate the quantitative differences in managerial implications between our model and the traditional one.
This study presents a signaling model of advertising for horizontally differentiated products. Th... more This study presents a signaling model of advertising for horizontally differentiated products. The central ingredients of the model are two important characteristics of advertising—targeting, and noisy information content. The theory yields interesting results about the informational role of targeted advertising, and its consequences. First, targeting can itself serve as a signal on product attributes. Second, the effectiveness of targeting depends not only on firms knowing consumer preferences, but on consumers knowing that firms know this. This creates a distinction between strategies of targeting and personalization. Third, the effectiveness of targeting in equilibrium may (far) exceed the information contained directly in the targeted message. Fourth, information content is not, however, superfluous. Specifically, when ads contain no information, a targeting equilibrium does not exist. Together, these results reveal how advertising conveys information both through the content of the message and the firm’s choice of advertising medium. Furthermore, the model is robust to the various critiques of prior work on ads-as-signals: namely, that ad content is irrelevant, ad exposure is unnecessary, and the choice of ads as signals is inherently arbitrary.
Television networks spend about 16% of their revenues on tune-ins, which are previews or advertis... more Television networks spend about 16% of their revenues on tune-ins, which are previews or advertisements for their own shows. In this paper, we examine two questions. First, what is the informational content in advertising? Second, is this level of expenditures consistent with profit maximization? To answer these questions, we use a new and unique micro-level panel dataset on the television viewing decisions of a large sample of individuals, matched with data on show tune-in advertisements. The difference in ( effectiveness of advertisements between ''regular'' shows about which view-) ers are assumed to have substantial information a priori and ''specials'' ( ) about which they have very little reveals the value of information in advertisements and the different roles that information can play. The number of exposures for each individual is likely to be correlated with their preferences, since networks target their audiences. We address this endogeneity problem by controlling for observed, and integrating the unobserved, characteristics of individuals, and find that the estimated effects of tune-ins are still large. Finally, we find that actual expenditures on tune-ins closely match the predicted optimal levels of spending.
Television networks spend about 16% of their revenues on tune-ins, which are previews or advertis... more Television networks spend about 16% of their revenues on tune-ins, which are previews or advertisements for their own shows. In this paper, we examine two questions. First, what is the informational content in advertising? Second, is this level of expenditures consistent with profit maximization? To answer these questions, we use a new and unique micro-level panel dataset on the television viewing decisions of a large sample of individuals, matched with data on show tune-in advertisements. The difference in ( effectiveness of advertisements between ''regular'' shows about which view-) ers are assumed to have substantial information a priori and ''specials'' ( ) about which they have very little reveals the value of information in advertisements and the different roles that information can play. The number of exposures for each individual is likely to be correlated with their preferences, since networks target their audiences. We address this endogeneity problem by controlling for observed, and integrating the unobserved, characteristics of individuals, and find that the estimated effects of tune-ins are still large. Finally, we find that actual expenditures on tune-ins closely match the predicted optimal levels of spending.
Communication is central to many settings in marketing and economics. A focal attribute of commun... more Communication is central to many settings in marketing and economics. A focal attribute of communication is miscommunication. We model this key characteristic as a noise in the messages communicated, so that the sender of a message is uncertain about its perception by the receiver, and then identify the strategic consequences of miscommunication. We study a model where competing senders (of different types) can invest in improving the precision of the informative but noisy message they send to a receiver, and find that there exists a separating equilibrium where senders’ types are completely revealed. Thus, although communication is noisy it delivers perfect results in equilibrium. This result stems from the fact that a sender’s willingness to invest in improving the precision of their messages can itself serve as a signal. Interestingly, the content of the messages is ignored by the receiver in such a signaling equilibrium, but plays a central role by shaping her beliefs off the equilibrium path (and thus, enables separation between the types). This result also illustrates the uniqueness of the signaling model presented here. Unlike other signaling models, the suggested model does not require that the costs and benefits of the senders will be correlated with their types to achieve separation. The model’s results have implications for various marketing communication tools such as advertising and sales forces.
Page 1. BHARAT N. ANAND and RON SHACHAR* This study provides evidence that a multiproduct firm&#x... more Page 1. BHARAT N. ANAND and RON SHACHAR* This study provides evidence that a multiproduct firm's portfolio of products affects consumer purchase decisions about each of the firm's products. The authors present a theory that explains this empirical regu-larity. ...
Page 1. Advertising, the Matchmaker* Bharat N. Anand Harvard University Ron Shachar Tel-Aviv Un... more Page 1. Advertising, the Matchmaker* Bharat N. Anand Harvard University Ron Shachar Tel-Aviv University December 2004 Abstract This study models advertising content as a noisy signal on product attributes, and includes it as an element in the consumer's information set. ...
In most democracies, at least two out of any three individuals vote for the same party in sequent... more In most democracies, at least two out of any three individuals vote for the same party in sequential elections. This paper presents a model in which vote-persistence is partly due to the dependence of the utility on the previous voting decision. This dependence is termed 'habit formation'. The model and its implications are supported by individual-level panel data on the presidential elections in the USA in 1972 and 1976. For example, it is found that the voting probability is a function of the lagged choice variable, even when the endogeneity of the lagged variable is accounted for, and that the tendency to vote for different parties in sequential elections decreased with the age of the voter. Furthermore, using structural estimation the effect of habit is estimated, while allowing unobserved differences among respondents. The structural habit parameter implies that the effect of previous votes on the current decision is quite strong. The habit model fits the data better than the traditional 'party identification' model.
The new decade has been called "the age of information." We show that, although information has b... more The new decade has been called "the age of information." We show that, although information has become more accessible, the increase in the variety of products has made consumers' choices complex and uncertain. Faced with uncertainty about products' attributes offered by "umbrella brands," consumers rely on cues, such as the overall "image" of the brands. Using data on television viewing choices, we show that the effect of these "brand images" on product choices is stronger than the effect of the products' attributes. Furthermore, we demonstrate that the lack of information contributes to observed brand loyalty more than the oft-discussed "emotional attachment" to brands.
The extensive literature on voter turnout has devoted relatively little attention to the hypothes... more The extensive literature on voter turnout has devoted relatively little attention to the hypothesis that casting a ballot in one election increases one's propensity to go to the polls in the future. This hypothesis is supported by voter turnout patterns in the 1972-4-6 and 1992-4-6 American National Election Studies panel surveys as well as published experimental research. The effects of past voter turnout on current voting propensities are sizeable and robust across a wide range of model specifications, including those that take into account the possibility of stable unobserved factors affecting both past and current turnout. We conclude by discussing the implications of consuetude for political and social behavior.
Habit is a frequently mentioned but understudied cause of political action. This article provides... more Habit is a frequently mentioned but understudied cause of political action. This article provides the first direct test of the hypothesis that casting a ballot in one election increases one's propensity to go to the polls in the future. A field experiment involving 25,200 registered voters was conducted prior to the November general election of 1998. Subjects were randomly assigned to treatment conditions in which they were urged to vote through direct mail or face-to-face canvassing. Compared to a control group that received no contact, the treatment groups were significantly more likely to vote in 1998. The treatment groups were also significantly more likely to vote in local elections held in November of 1999. After deriving a statistical estimator to isolate the effect of habit, we find that, ceteris paribus, voting in one election substantially increases the likelihood of voting in the future. Indeed, the influence of past voting exceeds the effects of age and education reported in previous studies.
The extensive literature on voter turnout has devoted relatively little attention to the hypothes... more The extensive literature on voter turnout has devoted relatively little attention to the hypothesis that casting a ballot in one election increases one's propensity to go to the polls in the future. This hypothesis is supported by voter turnout patterns in the 1972-4-6 and 1992-4-6 American National Election Studies panel surveys as well as published experimental research. The effects of past voter turnout on current voting propensities are sizeable and robust across a wide range of model specifications, including those that take into account the possibility of stable unobserved factors affecting both past and current turnout. We conclude by discussing the implications of consuetude for political and social behavior.
We present an empirical study of spatial competition and a methodology to estimate demand for pro... more We present an empirical study of spatial competition and a methodology to estimate demand for products with unobservable characteristics. Using panel data, we estimate a discrete choice model with latent product attributes and unobserved heterogenous consumer preferences. Our application of the methodology to the network television industry yields estimates that are consistent with experts' views. Given our estimates, we compute Nash equilibria of a product location game, and find that firms' observed strategies (such as the degree of product differentiation) are generally optimal. Discrepancies between actual and optimal strategies reflect the networks' adherence to "rules of thumb," and possibly, bounded rationality behavior.
This paper examines a mechanism that underlies both the political business cycle and the cycle in... more This paper examines a mechanism that underlies both the political business cycle and the cycle in non-economic policies executed by politicians. We show that if rational voters suffer from forgetfulness (a noise in the memory). then government expenditure on the production of public good increases as elections approach. Hence, the model describes a cycle that is observed in the government expenditures of democratic societies. Unlike previous models, this model does not require that the government have information superiority over rational voters with respect to its competency. According to this model, incumbents transfer resources from the beginning of their terms of service and use them near the end of their terms. We also find that the less concave the production function, the wider the cycle.
This study shows theoretically and empirically that exposure to advertising increases consumers' ... more This study shows theoretically and empirically that exposure to advertising increases consumers' tendency to purchase the promoted product because the informative content of advertising resolves some of the uncertainty that the risk averse consumers face and thus reduces the risk associated with the product. We call this effect the "risk-reduction" role of advertising. The risk-reduction model implies that advertising effectiveness depends on (a) the risk preference parameter, (b) the precision of the advertising message, (c) the familiarity of the consumer with the product, (d) the consumer's sensitivity to products' attributes (and thus, her involvement level with the product), and (e) the diversity of products offered by multiproduct firms. These findings suggest that ads spending should be higher (a) for new and relatively unknown products, (b) for high-involvement products, (c) when ads can be quite precise, and (d) when the firm offers a diverse product-line. It also implies that ads should target consumers (a) who are more sensitive to risk, (b) who are more involved, and (c) those who are not familiar with the promoted product.
This study shows theoretically and empirically that exposure to advertising increases consumers’ ... more This study shows theoretically and empirically that exposure to advertising increases consumers’ tendency to purchase the promoted product because the informative content of advertising resolves some of the uncertainty that the risk averse consumers face and thus reduces the risk associated with the product. We call this effect the “risk-reduction” role of advertising. The risk-reduction model implies that advertising effectiveness depends on (a) the risk preference parameter, (b) the precision of the advertising message, (c) the familiarity of the consumer with the product, (d) the consumer’s sensitivity to products’ attributes (and thus, her involvement level with the product), and (e) the diversity of products offered by multiproduct firms. These findings suggest that ads spending should be higher (a) for new and relatively unknown products, (b) for high-involvement products, (c) when ads can be quite precise, and (d) when the firm offers a diverse product-line. It also implies that ads should target consumers (a) who are more sensitive to risk, (b) who are more involved, and (c) those who are not familiar with the promoted product. The model allows ads to affect choices also through a direct effect on the utility (i.e., the standard approach to formulate the effect of advertising). In our empirical example (where the products are television shows) the risk-reduction effect is significant and strong and the direct effect is negligible behaviorally. We discuss the welfare implications of these findings, and illustrate the quantitative differences in managerial implications between our model and the traditional one.
This study presents a signaling model of advertising for horizontally differentiated products. Th... more This study presents a signaling model of advertising for horizontally differentiated products. The central ingredients of the model are two important characteristics of advertising—targeting, and noisy information content. The theory yields interesting results about the informational role of targeted advertising, and its consequences. First, targeting can itself serve as a signal on product attributes. Second, the effectiveness of targeting depends not only on firms knowing consumer preferences, but on consumers knowing that firms know this. This creates a distinction between strategies of targeting and personalization. Third, the effectiveness of targeting in equilibrium may (far) exceed the information contained directly in the targeted message. Fourth, information content is not, however, superfluous. Specifically, when ads contain no information, a targeting equilibrium does not exist. Together, these results reveal how advertising conveys information both through the content of the message and the firm’s choice of advertising medium. Furthermore, the model is robust to the various critiques of prior work on ads-as-signals: namely, that ad content is irrelevant, ad exposure is unnecessary, and the choice of ads as signals is inherently arbitrary.
Television networks spend about 16% of their revenues on tune-ins, which are previews or advertis... more Television networks spend about 16% of their revenues on tune-ins, which are previews or advertisements for their own shows. In this paper, we examine two questions. First, what is the informational content in advertising? Second, is this level of expenditures consistent with profit maximization? To answer these questions, we use a new and unique micro-level panel dataset on the television viewing decisions of a large sample of individuals, matched with data on show tune-in advertisements. The difference in ( effectiveness of advertisements between ''regular'' shows about which view-) ers are assumed to have substantial information a priori and ''specials'' ( ) about which they have very little reveals the value of information in advertisements and the different roles that information can play. The number of exposures for each individual is likely to be correlated with their preferences, since networks target their audiences. We address this endogeneity problem by controlling for observed, and integrating the unobserved, characteristics of individuals, and find that the estimated effects of tune-ins are still large. Finally, we find that actual expenditures on tune-ins closely match the predicted optimal levels of spending.
Television networks spend about 16% of their revenues on tune-ins, which are previews or advertis... more Television networks spend about 16% of their revenues on tune-ins, which are previews or advertisements for their own shows. In this paper, we examine two questions. First, what is the informational content in advertising? Second, is this level of expenditures consistent with profit maximization? To answer these questions, we use a new and unique micro-level panel dataset on the television viewing decisions of a large sample of individuals, matched with data on show tune-in advertisements. The difference in ( effectiveness of advertisements between ''regular'' shows about which view-) ers are assumed to have substantial information a priori and ''specials'' ( ) about which they have very little reveals the value of information in advertisements and the different roles that information can play. The number of exposures for each individual is likely to be correlated with their preferences, since networks target their audiences. We address this endogeneity problem by controlling for observed, and integrating the unobserved, characteristics of individuals, and find that the estimated effects of tune-ins are still large. Finally, we find that actual expenditures on tune-ins closely match the predicted optimal levels of spending.
Communication is central to many settings in marketing and economics. A focal attribute of commun... more Communication is central to many settings in marketing and economics. A focal attribute of communication is miscommunication. We model this key characteristic as a noise in the messages communicated, so that the sender of a message is uncertain about its perception by the receiver, and then identify the strategic consequences of miscommunication. We study a model where competing senders (of different types) can invest in improving the precision of the informative but noisy message they send to a receiver, and find that there exists a separating equilibrium where senders’ types are completely revealed. Thus, although communication is noisy it delivers perfect results in equilibrium. This result stems from the fact that a sender’s willingness to invest in improving the precision of their messages can itself serve as a signal. Interestingly, the content of the messages is ignored by the receiver in such a signaling equilibrium, but plays a central role by shaping her beliefs off the equilibrium path (and thus, enables separation between the types). This result also illustrates the uniqueness of the signaling model presented here. Unlike other signaling models, the suggested model does not require that the costs and benefits of the senders will be correlated with their types to achieve separation. The model’s results have implications for various marketing communication tools such as advertising and sales forces.
Page 1. BHARAT N. ANAND and RON SHACHAR* This study provides evidence that a multiproduct firm&#x... more Page 1. BHARAT N. ANAND and RON SHACHAR* This study provides evidence that a multiproduct firm's portfolio of products affects consumer purchase decisions about each of the firm's products. The authors present a theory that explains this empirical regu-larity. ...
Page 1. Advertising, the Matchmaker* Bharat N. Anand Harvard University Ron Shachar Tel-Aviv Un... more Page 1. Advertising, the Matchmaker* Bharat N. Anand Harvard University Ron Shachar Tel-Aviv University December 2004 Abstract This study models advertising content as a noisy signal on product attributes, and includes it as an element in the consumer's information set. ...
In most democracies, at least two out of any three individuals vote for the same party in sequent... more In most democracies, at least two out of any three individuals vote for the same party in sequential elections. This paper presents a model in which vote-persistence is partly due to the dependence of the utility on the previous voting decision. This dependence is termed 'habit formation'. The model and its implications are supported by individual-level panel data on the presidential elections in the USA in 1972 and 1976. For example, it is found that the voting probability is a function of the lagged choice variable, even when the endogeneity of the lagged variable is accounted for, and that the tendency to vote for different parties in sequential elections decreased with the age of the voter. Furthermore, using structural estimation the effect of habit is estimated, while allowing unobserved differences among respondents. The structural habit parameter implies that the effect of previous votes on the current decision is quite strong. The habit model fits the data better than the traditional 'party identification' model.
The new decade has been called "the age of information." We show that, although information has b... more The new decade has been called "the age of information." We show that, although information has become more accessible, the increase in the variety of products has made consumers' choices complex and uncertain. Faced with uncertainty about products' attributes offered by "umbrella brands," consumers rely on cues, such as the overall "image" of the brands. Using data on television viewing choices, we show that the effect of these "brand images" on product choices is stronger than the effect of the products' attributes. Furthermore, we demonstrate that the lack of information contributes to observed brand loyalty more than the oft-discussed "emotional attachment" to brands.
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Papers by Ron Shachar