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Winning the Battle but Losing the War: The Psychology of Debt Management

February 10, 2012 Comments off

Winning the Battle but Losing the War: The Psychology of Debt Management (PDF)
Source: Journal of Marketing Research

When consumers carry multiple debts, how do they decide which debt to repay fist? Normatively, consumers should repay the debt with the highest interest rate most quickly. However, because people tend to break complicated tasks into more manageable parts, and because losses are most distressing when segregated, the authors hypothesize that people will pay off the smallest loan first to reduce the total number of outstanding loans and achieve a sense of tangible progress toward debt repayment. To experimentally examine how consumers manage multiple debts, the authors develop an incentive-compatible debt management game, in which participants are saddled with multiple debts and need to decide how to repay them over time. Consistent with the hypothesis, four experiments reveal evidence of debt account aversion: Participants consistently pay off small debts first, even though the larger debts have higher interest rates. The authors also find that restricting participants’ ability to completely pay off small debts, and focusing their attention on the amount of interest each debt has accumulated, helps them reduce overall debt more quickly.

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Social Transmission, Emotion, and the Virality of Online Content

August 8, 2011 Comments off

Social Transmission, Emotion, and the Virality of Online Content (PDF)
Source: Journal of Marketing Research, Forthcoming

Why are certain pieces of online content more viral than others? This article takes a psychological approach to understanding diffusion. Using a unique dataset of all the New York Times articles published over a three month period, the authors examine how emotion shapes virality. Results indicate that positive content is more viral than negative content, but that the relationship between emotion and social transmission is more complex than valence alone, and is driven in part by physiological arousal. Content that evokes either positive (awe) or negative (anger or anxiety) emotions characterized by activation (i.e., high arousal) is more viral. Content that evokes deactivating emotion (sadness) is less viral. These results hold controlling for how surprising, interesting, or practically useful content is (all of which are positively linked to virality), as well as external drivers of attention (e.g., how prominently content was featured). Experimental results further demonstrate the causal impact of specific emotion on transmission, and illustrate that it is driven by the level of activation induced. Taken together, these findings shed light on why people share content and provide insight into designing effective viral marketing campaigns.

See also: What Do People Talk About? Drivers of Immediate and Ongoing Word-of-Mouth (PDF)

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