Ups and Downs: How to Shape an Audience's Sentiment

49 Pages Posted: 13 May 2022 Last revised: 12 Jul 2022

See all articles by Hongqiao Chen

Hongqiao Chen

Nanjing University - School of Management and Engineering

Ming Hu

University of Toronto - Rotman School of Management

Jingchen Liu

Nanjing University - School of Business

Yaniv Ravid

University of Toronto, Rotman School of Management, Students

Date Written: July 8, 2022

Abstract

Within the framework of prospect theory, this paper considers a decision-maker who wishes to maximize an audience's experienced utility under three different settings. First, we investigate the problem of simultaneous vs. sequential release of a series such as songs or TV episodes, where the decision-maker does not know a priori the audience's exact valuation of each item. We describe the audience characteristics that make one release strategy preferable to the other and show that if the audience's sensitivity to losses is sufficiently small (resp., large), the optimal strategy is to release all items in the series sequentially (resp., simultaneously). Second, we study the problem of releasing a piece of good news vs. bad news, where the decision-maker may incrementally reveal the news over a preemptive period. We characterize the optimal release strategy for both cases of good and bad news and show that when the ultimate news is good (resp., bad), it could be optimal to misguide the audience by first releasing information of a negative (resp., positive) sentiment. Lastly, we consider the problem of organizing an event such as a concert or show with performances of known valuations, where the decision-maker needs to arrange the sequence of all performances. We show that it can be optimal to arrange cycles of strong and weak performances alternating throughout the event. Across all three settings, we show that the audience's sensitivity to losses relative to a reference point is a critical factor that governs how to design different experiences to better shape the audience's sentiment.

Keywords: prospect theory, experienced utility, series release, news release, experiential service design

JEL Classification: D03, L82

Suggested Citation

Chen, Hongqiao and Hu, Ming and Liu, Jingchen and Ravid, Yaniv, Ups and Downs: How to Shape an Audience's Sentiment (July 8, 2022). Available at SSRN: https://ssrn.com/abstract=4088821 or http://dx.doi.org/10.2139/ssrn.4088821

Hongqiao Chen

Nanjing University - School of Management and Engineering ( email )

Nanjing, 210093
China

Ming Hu

University of Toronto - Rotman School of Management ( email )

105 St. George st
Toronto, ON M5S 3E6
Canada
416-946-5207 (Phone)

HOME PAGE: http://ming.hu

Jingchen Liu

Nanjing University - School of Business ( email )

22 Hankou Road
Nanjing, Jiangsu 210093
China

Yaniv Ravid (Contact Author)

University of Toronto, Rotman School of Management, Students ( email )

Toronto, ON
Canada

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