Index
Session 1.................................................................................................................................................3
On Expectations and the Monetary Stakes in Ultimatum Games.......................................................3
Conjoint Analysis: A Do it Yourself Guide............................................................................................5
Session 3.................................................................................................................................................7
Economic Value to the Customer........................................................................................................7
Session 3+4.............................................................................................................................................9
Overview of Pricing in Marketing Strategy..........................................................................................9
Session 4...............................................................................................................................................11
Consumer benefits and total demand..............................................................................................11
Session 5...............................................................................................................................................14
The Sustainability Price: Expanding Environmental Life Cycle Costing..............................................14
The Hidden Cost of UK Food.............................................................................................................16
The true price of jeans.....................................................................................................................18
Session 6...............................................................................................................................................20
The Airline Fee That Exists for No Apparent Reason.........................................................................22
Does everyone have a price? Understanding people’s attitude towards online and offline price
discrimination...................................................................................................................................24
Session 7...............................................................................................................................................26
Bundling handout.............................................................................................................................26
Session 8...............................................................................................................................................28
Global public goods..........................................................................................................................28
The Tragedy of the Commons...........................................................................................................30
Price Floors and Price Ceilings – Principles of Economics.................................................................32
Session 10.............................................................................................................................................34
Customer Profitability and Lifetime Value........................................................................................34
10 Managerial Uses of CLV................................................................................................................36
Quantity Discounts on a Virtual Good: The Results of a Massive Pricing Experiment at King Digital
Entertainment...................................................................................................................................38
Session 11.............................................................................................................................................40
MoviePass CEO Mitch Lowe Says He Could Gut AMC’s Profits..........................................................40
MoviePass Proves Great for Customers, Disastrous for Investors.....................................................42
Session 12............................................................................................................................................43
The New York Times Paywall.............................................................................................................45
12 SaaS Pricing Models.....................................................................................................................49
,
,Session 1
On Expectations and the Monetary Stakes in Ultimatum Games
The article "On Expectations and the Monetary Stakes in Ultimatum Games" by Elizabeth Hoffman,
Kevin A. McCabe, and Vernon L. Smith explores how varying the monetary stakes influences behavior
in ultimatum games. Here's a summary of the key points from the paper:
Overview
The ultimatum game is a standard experiment in economics where two players decide how to divide
a sum of money. Player 1 proposes a division, and Player 2 can either accept or reject it. If Player 2
rejects the offer, both players get nothing. The study examines the effects of changing the stakes from
$10 to $100 on the players' decisions.
Key Findings
1. Increased Stakes: The study compares the outcomes when the stakes are $10 and $100. It
was found that as the stakes increased, the behavior of the players showed some changes:
Offers Made by Player 1: Contrary to the hypothesis that higher stakes would lead to
lower offers, the offers did not significantly decrease when the stakes were increased
to $100.
Rejection Rates by Player 2: The rejection rates increased when the stakes were
raised to $100, although this increase was not statistically significant overall.
However, in the context of contest/exchange treatments, the rejection rates
increased significantly.
2. Property Rights and Stakes:
Random Entitlement vs. Contest/Exchange: The study explored two conditions:
random entitlement and contest/exchange. In random entitlement, the money was
simply divided between the players. In contest/exchange, the players had to earn
their positions through a competition (answering current events questions). The
contest/exchange condition with $100 stakes saw a significant increase in rejection
rates compared to $10 stakes.
3. Behavioral Insights:
Fear of Rejection: Player 1’s fear of rejection by Player 2 increased with higher stakes,
which sometimes led to more generous offers to ensure acceptance.
Risk Aversion: The behavior of Player 1 suggested constant relative risk aversion,
meaning that their risk preferences did not change proportionally with the increase
in stakes.
Methodology
Participants: Subjects were recruited from undergraduate students and were incentivized
with small participation fees in addition to potential earnings from the game.
Design: The experiment involved 50 pairs with $100 stakes and compared these results with
48 pairs with $10 stakes.
, Statistical Analysis: Various statistical tests, including Wilcoxon and Epps-Singleton tests,
were used to compare the distributions of offers and rejection rates under different
conditions.
Conclusion
The study highlights that while increasing the stakes in ultimatum games does not drastically alter the
offers made by Player 1, it does affect the rejection rates, especially under contest/exchange
conditions. This indicates that players' expectations and perceptions of fairness are influenced by the
context and the monetary amount involved.
These findings contribute to understanding how monetary incentives and the structure of the
bargaining environment influence economic decision-making behavior
Session 1.................................................................................................................................................3
On Expectations and the Monetary Stakes in Ultimatum Games.......................................................3
Conjoint Analysis: A Do it Yourself Guide............................................................................................5
Session 3.................................................................................................................................................7
Economic Value to the Customer........................................................................................................7
Session 3+4.............................................................................................................................................9
Overview of Pricing in Marketing Strategy..........................................................................................9
Session 4...............................................................................................................................................11
Consumer benefits and total demand..............................................................................................11
Session 5...............................................................................................................................................14
The Sustainability Price: Expanding Environmental Life Cycle Costing..............................................14
The Hidden Cost of UK Food.............................................................................................................16
The true price of jeans.....................................................................................................................18
Session 6...............................................................................................................................................20
The Airline Fee That Exists for No Apparent Reason.........................................................................22
Does everyone have a price? Understanding people’s attitude towards online and offline price
discrimination...................................................................................................................................24
Session 7...............................................................................................................................................26
Bundling handout.............................................................................................................................26
Session 8...............................................................................................................................................28
Global public goods..........................................................................................................................28
The Tragedy of the Commons...........................................................................................................30
Price Floors and Price Ceilings – Principles of Economics.................................................................32
Session 10.............................................................................................................................................34
Customer Profitability and Lifetime Value........................................................................................34
10 Managerial Uses of CLV................................................................................................................36
Quantity Discounts on a Virtual Good: The Results of a Massive Pricing Experiment at King Digital
Entertainment...................................................................................................................................38
Session 11.............................................................................................................................................40
MoviePass CEO Mitch Lowe Says He Could Gut AMC’s Profits..........................................................40
MoviePass Proves Great for Customers, Disastrous for Investors.....................................................42
Session 12............................................................................................................................................43
The New York Times Paywall.............................................................................................................45
12 SaaS Pricing Models.....................................................................................................................49
,
,Session 1
On Expectations and the Monetary Stakes in Ultimatum Games
The article "On Expectations and the Monetary Stakes in Ultimatum Games" by Elizabeth Hoffman,
Kevin A. McCabe, and Vernon L. Smith explores how varying the monetary stakes influences behavior
in ultimatum games. Here's a summary of the key points from the paper:
Overview
The ultimatum game is a standard experiment in economics where two players decide how to divide
a sum of money. Player 1 proposes a division, and Player 2 can either accept or reject it. If Player 2
rejects the offer, both players get nothing. The study examines the effects of changing the stakes from
$10 to $100 on the players' decisions.
Key Findings
1. Increased Stakes: The study compares the outcomes when the stakes are $10 and $100. It
was found that as the stakes increased, the behavior of the players showed some changes:
Offers Made by Player 1: Contrary to the hypothesis that higher stakes would lead to
lower offers, the offers did not significantly decrease when the stakes were increased
to $100.
Rejection Rates by Player 2: The rejection rates increased when the stakes were
raised to $100, although this increase was not statistically significant overall.
However, in the context of contest/exchange treatments, the rejection rates
increased significantly.
2. Property Rights and Stakes:
Random Entitlement vs. Contest/Exchange: The study explored two conditions:
random entitlement and contest/exchange. In random entitlement, the money was
simply divided between the players. In contest/exchange, the players had to earn
their positions through a competition (answering current events questions). The
contest/exchange condition with $100 stakes saw a significant increase in rejection
rates compared to $10 stakes.
3. Behavioral Insights:
Fear of Rejection: Player 1’s fear of rejection by Player 2 increased with higher stakes,
which sometimes led to more generous offers to ensure acceptance.
Risk Aversion: The behavior of Player 1 suggested constant relative risk aversion,
meaning that their risk preferences did not change proportionally with the increase
in stakes.
Methodology
Participants: Subjects were recruited from undergraduate students and were incentivized
with small participation fees in addition to potential earnings from the game.
Design: The experiment involved 50 pairs with $100 stakes and compared these results with
48 pairs with $10 stakes.
, Statistical Analysis: Various statistical tests, including Wilcoxon and Epps-Singleton tests,
were used to compare the distributions of offers and rejection rates under different
conditions.
Conclusion
The study highlights that while increasing the stakes in ultimatum games does not drastically alter the
offers made by Player 1, it does affect the rejection rates, especially under contest/exchange
conditions. This indicates that players' expectations and perceptions of fairness are influenced by the
context and the monetary amount involved.
These findings contribute to understanding how monetary incentives and the structure of the
bargaining environment influence economic decision-making behavior
