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Veladone Study Zero as a Special Price

Veladone Study Zero as a Special Price. Taya Leary July 9, 2008 Harvard University. Agenda: Why do we study Placebo? Veladone Study at the Media Lab. Results of the Study. Why do we study Zero Price? Experiment at MIT. Results of the Experiment. Q&A.

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Veladone Study Zero as a Special Price

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  1. Veladone StudyZero as a Special Price Taya Leary July 9, 2008Harvard University

  2. Agenda: Why do we study Placebo?Veladone Study at the Media Lab.Results of the Study. Why do we study Zero Price?Experiment at MIT.Results of the Experiment. Q&A

  3. Why do we study Placebo?To understand the effect of expectation on medicine:e.g. antidepressants are up to 70% placeboBy manipulating the placebo component we can increase the effectiveness of the medicine

  4. Veladone Study at the Media Lab Imagine that you are participating in an experiment to test the effectiveness of a new painkiller - Veladone - Rx. Experiment Setup

  5. Veladone Study at the Media Lab: Experiment Factors: • Country of Origin (China vs. US) • Price (high price $2.50 and discounted price $ 0.10) • Subjects believed that Veladone - Rx was an opioid pain reliever, in fact it was placebo

  6. Results of the Study: Subjects on average reported less pain after taking more expensive pill

  7. Results of the Study: The significant Country and Ethnicity effects in the regression are a result of a strong Country*Ethnicity interaction. While non-Asians do not respond to the Country manipulation, Asians demonstrate a much larger reduction in pain scores when in the China condition.

  8. Results of the Study: Subjects who report experiencing pain other than the experimental procedure the day of the experiment, or the month prior to the experiment, show a significantly different response to the two price levels (p<.05) than do subjects reporting no pain in this time frame (p=.237). This interaction is significant, p<.001. Subject’s self-report of painful experiences during their lifetime, however, does not interact with response to the Price factor

  9. Why do we study Zero Price?Zero is used in a qualitatively different manner from other numbers. Transition from small positive numbers to zero is of discontinuous.E.g. Zero reward vs. small positive rewardPenalty for parents who are late picking up their children

  10. Why do we study Zero Price?People apply market norms to the product when prices are mentionedPeople apply social norms when prices are not mentionedE.g. Thanksgiving dinner

  11. The Experiment at MIT Imagine that you are asked to fill out a survey and as a reward you are offered Lindt truffles. Factors: Social or market survey Free truffle or 1 ¢

  12. We asked about 160 people: when the price is zero people take either one candy or zero when the price is 1 ¢ people on average take 4 pieces Results of the Study:

  13. These results suggest that social norms are more likely to emerge when price is not a part of the exchange. Extra positive effect of the free product: Buy One Get One Free (BOGO) is better promotion emotionally than all-at-half-price Promotions. Results of the Study:

  14. Related Literature : Kristina Shampan'er and Dan Ariely (2007), "How Small is Zero Price? The True Value of Free Products". Marketing Science. Dan Ariely (2008), “Predictably Irrational” Dan Ariely, Rebecca Waber, Baba Shiv, Ziv Carmon (2008), “Can Price Modulate the Actual Efficacy of Medications?” New England Magazine of Medicine.

  15. Questions? Thank you!

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