The Reference Effect of Delay Announcements: A Field Experiment

Management Science

56 Pages Posted: 5 Apr 2017 Last revised: 30 Sep 2020

See all articles by Qiuping Yu

Qiuping Yu

Scheller College of Business, Georgia Institute of Technology

Gad Allon

University of Pennsylvania - The Wharton School

Achal Bassamboo

Northwestern University - Department of Managerial Economics and Decision Sciences (MEDS)

Date Written: April 3, 2017

Abstract

We explore whether customers are loss averse in time and how delay information may impact such reference-dependent behavior using observational and field-experiment data from two call centers of an Israeli bank. We consider settings with no announcements and announcements of different accuracy levels. We face two key challenges: (1) we do not directly observe the reference points customer use as any other studies using field data; and (2) it is difficult to separate the reference-dependent behavior from the potential non-linear waiting cost of customers. To address these challenges, we develop a dynamic decision model with consumer learning, through which we infer the reference point each customer used during any given call. The reference points may be different across different customers and evolve across different calls of the same customers. We also exclude the alternative explanation by showing that our main reference-dependent models better explain the observed customer abandonment than models where customers have non-linear waiting cost. Our results indicate that customers are loss averse regardless of the availability or accuracy of the announcements, when their waiting time is relatively long (90s or longer). While delay announcements do not alter the nature that customers are loss averse, accurate announcements may affect customers' belief about the offered waiting time and thus impact the reference points. Through counterfactual studies, we demonstrate that providing delay announcements improves the call center performance given the loss aversion behavior observed in our data. Interestingly, as customers become more loss averse, the value of providing delay announcements decreases.

Keywords: Loss Aversion in Time, Delay Announcements, Field Experiment, Structural Estimation

Suggested Citation

Yu, Qiuping and Allon, Gad and Bassamboo, Achal, The Reference Effect of Delay Announcements: A Field Experiment (April 3, 2017). Management Science, Available at SSRN: https://ssrn.com/abstract=2945535 or http://dx.doi.org/10.2139/ssrn.2945535

Qiuping Yu (Contact Author)

Scheller College of Business, Georgia Institute of Technology ( email )

800 West Peachtree NW
Atlanta, GA 30308
United States

HOME PAGE: http://https://qiupingyu.com/

Gad Allon

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

Achal Bassamboo

Northwestern University - Department of Managerial Economics and Decision Sciences (MEDS) ( email )

2001 Sheridan Road
Evanston, IL 60208
United States

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