A product's physical appearance is difficult to quantify, and the impact of product appearance on demand has rarely been studied using market data. The authors adopt a recently developed morphing technique to measure a product's aesthetic design and investigate its effect on consumer preference. Drawing upon categorization theory, the authors consider the effects of three dimensions of aesthetic design—segment prototypicality (SP), brand consistency (BC), and cross-segment mimicry (CSM)—and their moderating effects on marketing mix effectiveness in a unified framework. The empirical analysis uses a unique, large data set consisting of 202 car models from 33 brands sold in the United States from 2003 to 2010. The authors find that consumer preference peaks at moderate levels of SP and BC and that economy-segment products benefit from CSM of luxury products. Moreover, SP intensifies price sensitivity, and BC muffles price sensitivity while increasing advertising effectiveness. Two what-if studies illustrate how managers can use the empirical model to evaluate alternative aesthetic design choices.

With behavior-based pricing (BBP), firms use customers’ purchase history data to price discriminate between past and new customers. Prior research has examined BBP in a non-channel setting. In this paper, we investigate BBP in a channel setting in which manufacturers sell to customers through exclusive retailers. We examine how channel members’ adoption of BBP affects wholesale and retail prices, profits, consumer surplus, and social welfare. We find that BBP decreases channel members’ profits when retailers use BBP and manufacturers use uniform pricing. However, BBP increases channel members’ profits when manufacturers and retailers use BBP. In addition, BBP by retailers alone increases consumer surplus, whereas BBP by manufacturers and retailers decreases consumer surplus. When manufacturers also use BBP, BBP decreases social welfare to a greater degree than when only retailers use BBP. Furthermore, when manufacturers cannot use BBP, their profits are higher with long-term wholesale price contracts. When manufacturers can use BBP, short-term wholesale price contracts yield higher profits for manufacturers and retailers. The online appendix is available at https://doi.org/10.1287/mksc.2017.1070 .

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C onspicuous consumption of status goods signals consumers' status and grants status value to them. In this article, we examine how firms selling status goods make vertical line extension decisions when they take consumers' status preferences into account. Analyzing an incumbent's vertical line extensions when it faces a threat of entry, we find that status preferences can make unprofitable extensions profitable. Moreover, without status preferences, an incumbent can introduce line extensions to crowd out the competitor's profit and deter entry. However, with status preferences, introducing line extensions can increase the competitor's profit and attract entry. We also find that incumbents should introduce downward extensions when they are monopolists and upward extensions when they face competition from lower-quality entrants. As the cost of entry increases, incumbents should change from introducing upward extensions to introducing downward extensions. As consumers' status preferences increase, incumbents introduce downward extensions under a wider range of situations.

Consumers experience a sense of loss when a product’s quality does not match their expectations. To alleviate consumer loss aversion (CLA), firms can disclose information to reduce consumers’ uncertainty about product quality and the resulting psychological loss. In this paper, we investigate the implications of CLA on firm profit, consumer surplus, and social welfare when firms endogenously make quality disclosure decisions. We find that CLA leads symmetric firms to disclose quality more often. Given that CLA weakly reduces consumers’ utility from buying a product and quality disclosure is costly, intuition suggests that CLA is detrimental to firms. We find that this intuition is true only in a monopoly. Surprisingly, CLA makes both firms in a competition better off. Moreover, CLA increases firms’ profit when they invest in quality disclosure instead of money-back guarantees to respond to CLA. We also find that CLA decreases consumer surplus and social welfare. Therefore, educating consumers to improve decision-making skills by deliberating on future outcomes and emotions can benefit firms at the cost of consumers and society. When firms disclose quality sequentially, CLA can discourage the follower from disclosing quality. A strong level of CLA increases the leader’s profit over the follower’s, thereby encouraging firms to be the first mover in quality disclosure. This paper was accepted by Juanjuan Zhang, marketing.