Posts Tagged ‘brands’
“We cannot reason ourselves out of our basic irrationality. All we can do is to learn the art of being irrational in a reasonable way.”*…
Classical economists posit that investment decisions are driven by rationality — a clear-eyed evaluation of risks and rewards… but then, meme stocks.
Kwabena Donkor, an assistant professor of marketing at Stanford Graduate School of Business has just unveiled some new research that suggests that identity distorts our financial choices, leading us to overvalue investments that reinforce our sense of self…
People don’t just invest with their wallets — they invest with their identity,” says Donkor, a faculty fellow at the Stanford Institute for Economic Policy Research.
In a novel field study involving soccer fans, Donkor and several colleagues uncover evidence of how identity can skew economic thinking. The researchers ran a series of experiments focused on fans who placed nearly 40,000 bets on English Premier League matches during the 2021-22 season. Participants — nearly 800 from Kenya and 1,600 from the United Kingdom — were given a budget and asked to place bets on upcoming matches. They received winnings based on the outcomes of randomly selected games.
Most of the participants were longtime supporters of a particular team. (Manchester United was their top favorite.) They were more optimistic about their favorite teams, betting 20% more on them. They rated their teams as having a 10% to 18% higher chance of victory than other teams, even when presented with forecasts from professional oddsmakers suggesting otherwise. These results persisted even after accounting for factors such as personal beliefs and appetite for risk.
The study also finds that participants placed a lower value on gains not aligned with their identity — what the researchers referred to as an “identity tax.” Fans effectively devalued these neutral bets by 17% to 27%. For poorly performing teams, this “tax” could soar as high as 47%, reflecting a strong emotional impulse to support their favorite team even when the odds were against it
The research, detailed in a paper cowritten with Lorenz Goette of the National University of Singapore, Maximilian Müller of the Toulouse School of Economics, Eugen Dimant of the University of Pennsylvania, and Michael Kurschilgen of UniDistance Suisse, shows that identity-driven preferences explain much of the gap in bettors’ behavior. Simulations showed that distorted beliefs due to identity account for as much as 44% of the difference in fans’ betting behavior. The remainder stemmed from preferences rooted in identity itself — people were willing to sacrifice potential gains to support options that aligned with who they are…
… The study’s findings have far-reaching implications for understanding economic behavior, particularly in areas like consumer finance, brand loyalty, and even political decision-making…
… the research hints at how consumers view different products. Items that align with a person’s identity are likely to be seen as complements rather than substitutes. For example, Donkor says a consumer who identifies strongly with sustainability might view eco-friendly products as essential enhancements to their lifestyle, even if they’re similar to comparable, less expensive goods.
Ultimately, these findings could improve our thinking about the biases that influence our financial lives. As the researchers point out, acknowledging the role of identity in decision-making is one key to designing better policies, creating more effective financial products, and ultimately improving individual welfare. “If we ignore identity,” Donkor concludes, “we miss the bigger picture in decision-making.”…
Understanding the choices that we, and those around us, make: “What Soccer Fans Can Teach Us About Making Irrational Decisions,” from @SIEPR.
* Aldous Huxley
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As we ponder the price (and as a reminder that there are other kinds of irrational decisions and that sometimes returns do matter to investors), we might recall that it was on this date in 2008 that Bernard “Bernie” Madoff was arrested and charged with defrauding investment clients of as much as $65 billion. A pioneer in electronic trading and chairman of the Nasdaq stock exchange in the early 1990s, he had turned to money management. By 2008, Madoff was running a huge and growing fund that promised its investors high and stable returns… the problem: it was a Ponzi scheme, the largest known Ponzi scheme in history.
“I think I’ve created a brand and a business”*…
Independent Studio Services, or ISS as it’s known in Hollywood, is one of the leading prop houses serving the motion picture and film community. Producers rely on it to fit sets with every manor of physical item, each authentically evocative of the scene being shot. Most of those items– from sideboards to side arms– are “commercially-anonymous”… that’s to say, not overtly branded. But increasingly over the last several years, via product placement, branded goods– the Heineken that James Bond drinks in Skyfall, the Coke cups in front of each American Idol judge– are slipping into the spotlight.
Still, there are lots of situations in which producers need a “branded” item that isn’t real:
“We’re trained to see brands, so when you don’t it’s almost jarring,” says Michael Bertolina of ISS. “But the network won’t use a brand if it interferes with an advertising deal they have or if it’s not used for its intended use. So instead of covering it with tape or running into a legal nightmare, we create these brands that are fictional.”
Given the normalcy of brands, prop houses like ISS base their fake products on them. Bertolina says the prop version gets modified to the point where it won’t impede on anyone’s intellectual property, “just like private label cereal boxes versus something from Kellogg’s.” So Leonard on Community reviews “Let’s” instead of Lay’s, or Ben Harmon drinks “Haberkern” on American Horror Story last season instead of Heineken.
“Our owner’s name is Gregg Bilson, so you’ll find Bilson cigarettes all over TV,” Bertolina adds. “If you watched Justified on FX, [Mags Bennett] ran a shop and had a rack of cigarettes behind her head all the time. They’re all Bilson.”
More on brands-that-aren’t at CoCreate.
* “I don’t think I am an actress. I think I’ve created a brand and a business.” – Pamela Anderson
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As we switch to generics, we might recall that it was on this date in 1969 that ARPANET, the forerunner of the internet as we know it, became an actual network. Initial test login characters had been sent on October 29 of that year from a ULCA computer to a computer at SRI in Menlo Park, CA, which were then permanently connected on November 21 through early routers (small packet-switching computers then called Interface Message Processors). With the addition of nodes U.C. Santa Barbara, and the University of Utah on this date, the “remote binary” configuration became a true network. By December 1971 ARPANET linked 23 host computers to each other; today there are over 900 million host computers connected to the internet– and over 2.4 Billion internet users worldwide.
85% confusion and 15% commission*…
Advertising is about selling desire, dreams. But compared to the dreams that animate the creators of advertising, well…
More glimpses into the fantasies of the Marketing-Industrial Complex at Things Real People Don’t Say About Advertising.
* “Advertising is 85% confusion and 15% commission.” – Fred Allen
As we console ourselves with Thomas Jefferson’s observation that “the most truthful part of a newspaper is the advertisements,” we might recall that it was on this date in 1985 that Playboy, a periodical valued by its loyal male readership for its enriching articles and informative advertisements, announced an end to the stapling of “centerfold” spreads.
1985 issues, unfettered by staples (source)
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