Time：15:30-17:00 on Wednesday, Sep. 7, 2022

Zoom ID：949 2717 8594

Password：4TbC0?

Topic：The Strategic Implications of Consumption Goals for Pricing Vice Products

Presenter：Mushegh Harutyunyan, Assistant Professor, Imperial College London

Host：Professor Lin Tian

Abstract：Research in psychology shows that consumption goals can help consumers avoid excessive consumption of vice goods and the associated long-term harm. In this paper, we propose a model of self-control with consumption goals and examine how goals moderate the behavior of consumers and the firm’s strategy. We find that consumers’ personal goals lead to a lower price for a less unhealthy product, but a higher price for a more unhealthy product. Furthermore, even though personal goals reduce the sales of a product, the firm can be better off if consumers have goals rather than no goals. The improvement in the firm's profits need not be at consumers’ expense. In fact, consumer welfare increases with personal goals. In some contexts, consumption is not driven by personal goals but shaped by social norms, such as the advice of experts or social groups. We find that unlike personal goals, normative goals make consumers less sensitive to price and do not always improve consumer welfare. Furthermore, normative goals can hurt the firm’s profits in contexts where personal goals could improve profits. Finally, we show that our framework with dynamically inconsistent preferences yields results that are consistent with alternative formulations of consumer self-control problems, such as the dual-self model of Thaler and Shefrin (1981) and the costly self-control model of Gul and Pesendorfer (2001).

Bio：Mushegh Harutyunyan is an Assistant Professor at Imperial College London. He obtained his Ph.D. from Washington University in St. Louis. In his research, Mushegh uses quantitative analytical methods to study firms’ strategic behavior and the resulting market outcomes. Specifically, he explores firms’ decisions on pricing, product design and launch, information sharing and distribution channel structure. His research also integrates experimental findings about consumers (e.g., loss aversion, fairness concerns, lack of self-control) into the traditional quantitative models, investigating how consumers’ behavioral traits affect the conventional wisdom about firms’ optimal strategies. Mushegh’s research has appeared in the Journal of Marketing Research and Journal of Retailing.