Monthly Archives: March 2025

Recent WSU Research Reveals How Scarcity Pricing Boosts Demand for ‘Cult Wineries’

A recent study from Washington State University reveals that wineries known for producing “cult wines” could boost long-term profits through strategic scarcity pricing despite keeping their initial prices low. This generates excess demand, enhancing the brand’s prestige and future revenue prospects. The research, spearheaded by the university’s School of Economic Sciences (SES), focused on data relating to luxury, rare wines available only to those on a winery’s allocation list or through the secondary market, explicitly targeting wineries in Washington, Oregon, and California with complete allocation lists.

Jill McCluskey, a WSU Regents Professor and the director of SES, co-authored the study and shared her fascination with the high-cost cult wine market. She wondered why these wineries didn’t eliminate their allocation lists by raising the prices of their high-quality products. “As an economist, the reasons behind their pricing strategies, which seemed to be optimised for maximising profits over time, were particularly fascinating to me,” she noted. The study found that pricing cult wines below the market equilibrium—where supply meets demand—increased demand due to the perceived scarcity among consumers.

Although this scarcity-pricing strategy didn’t maximise profits in the short term, it effectively increased demand for cult wines in the long run. More consumers were willing to purchase these wines at higher prices in the future, significantly increasing revenue for the winemakers. Ron Mittelhammer, another SES Regents Professor and co-author of the study, emphasised the importance of understanding market dynamics, particularly in nonstandard markets like cult wines. “Our findings provide a sound economic basis for the pricing strategies employed by some cult wine producers, which might otherwise be deemed unconventional and potentially subject to regulatory scrutiny,” he explained.

McCluskey pointed out that scarcity pricing principles apply to various other markets, including limited-edition whiskies, tickets for victorious sports teams, or popular restaurants that are hard to book. She emphasised that the key factor is the high quality of the product. “While this research can guide cult wine producers in their pricing strategies, scarcity pricing wouldn’t necessarily benefit all products or services,” she added. The study also explored the role of the secondary market, where cult wines are often resold at prices significantly higher than their initial release prices. Although secondary market sellers gain short-term profits, wineries benefit from the increased demand.

“We examined the price wedge—the difference between the secondary market price and the release price for those on the allocation list,” McCluskey explained. “Our findings indicated that the larger this price difference, the more demand increases over time, pushing up the secondary market prices the following year.” As secondary market prices rise, wineries are likely to adjust the release prices of their cult wines upwards in subsequent periods. However, to maintain the effectiveness of the scarcity-pricing strategy, winemakers need to ensure that their prices continue to foster excess demand.

McCluskey, who has a long-standing interest in the economics of the wine industry, including studies on sustainability labels and their impact on consumer demand, expressed her ongoing fascination with wine as a product linked to place and differentiation. She highlighted her plans to explore various consumer behaviours further and their implications for the wine industry, especially in light of current challenges such as health preferences, environmental factors, and the impacts of cannabis legalisation on wine demand.

More information: Jill McCluskey et al, Underpricing and perceived scarcity, Journal of Economic Behavior & Organization. DOI: 10.1016/j.jebo.2024.106873

Journal information: Journal of Economic Behavior & Organization Provided by Washington State University

Creating the Ideal Pitch: Understanding Business-to-Investor Marketing Strategies

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A recent study published in the Journal of Marketing explores effective strategies startups can use to craft their pitches to attract investors in a highly competitive venture capital environment. The research analyzed over 5,300 new ventures, focusing on how tangible achievements (costly signals) and verbal cues (costless signals) influence investor decision-making. The paper, titled “Business-to-Investor (B2I) Marketing: The Interplay of Costly and Costless Signals,” was authored by an esteemed group of academics, including Greg Nyilasy from the University of Melbourne, Shangwen Yi from the University of British Columbia, Dennis Herhausen from Vrije Universiteit Amsterdam, Stephan Ludwig from Monash University, and Darren W. Dahl also from the University of British Columbia. Their findings provide actionable insights for startups and investors, highlighting the importance of a balanced approach in startup pitches.

The researchers categorize startups’ signals to attract investment into two main types: costly and costless. Costly signals are tangible indicators of a startup’s potential, such as financial capital (existing investments in the business), human capital (founders’ education and experience), social capital (business and institutional connections), and intellectual capital (patents and intellectual property). On the other hand, costless signals are verbal cues that influence investor perception and include elements such as passion (enthusiasm and emotional intensity in the pitch) and concreteness (specificity and detail in the communication). The study provides a detailed analysis of how these signals interact and their effects on investor decision-making.

The study also reveals some surprising dynamics between the different types of signals. While a moderate level of costly signals can enhance the likelihood of securing funding, an excess may deter investors by suggesting overvaluation or limiting their involvement. Contrarily, excessive passion, often considered a positive trait, can backfire unless strong, costly signals support it. Furthermore, while detailed communication can assist startups lacking tangible achievements, it can appear rigid and inflexible when paired with a strong portfolio of expensive signals.

The implications of these findings are significant for both startups and investors. For startups lacking tangible achievements, the study advises avoiding an overuse of passionate language, which may come across as compensatory. Instead, they should focus on transparent and moderately detailed messaging. For those with robust, costly signals, showcasing passion can enhance investor confidence, but overly detailed pitches might reduce perceived flexibility. On the investor side, the research suggests a cautious approach to evaluating pitches that rely heavily on passion without substantive backing and a balanced appreciation for detailed communication in startups with fewer tangible achievements.

The study concludes with a call to action for startups and investors, emphasizing the need to refine pitch strategies and evaluation methods. By understanding and implementing the right balance of passion, detail, and achievements, startups can better position themselves in the competitive venture capital market. Investors, in turn, should assess pitches holistically, weighing both tangible and intangible signals to identify high-potential ventures. This research equips stakeholders with valuable strategies and aims to foster better matches within the venture capital ecosystem, ultimately benefiting the broader startup community.

More information: Greg Nyilasy et al, Business-to-Investor Marketing: The Interplay of Costly and Costless Signals, Journal of Marketing. DOI: 10.1177/00222429241288464

Journal information: Journal of Marketing Provided by American Marketing Association

Uniform Wealth Distribution Negatively Impacts the Climate

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The United Nations and several Nobel Prize winners have suggested that political and economic inequality contributes significantly to high carbon emissions. They argue that societies where wealth, power, and opportunities are more equally distributed—characteristically more democratic societies—are more adept at reducing their emissions. Contrary to this belief, however, evidence suggests otherwise.

Professor Indra de Soysa from the Norwegian University of Science and Technology’s Department of Sociology and Political Science challenges the conventional wisdom. He argues that it is a misconception to believe that democracy inherently fosters better climate outcomes. This assumption, he suggests, is often ideologically driven and not supported by empirical data. According to de Soysa, countries with significant economic and political disparities frequently report lower emissions than their more democratic counterparts, where wealth and power are more evenly spread.

De Soysa points out that a more equitable distribution of wealth implies an increase in consumption as the poorest sections of society improve their living standards, which, in turn, drives up emissions. His research, examining data from about 170 countries from 1990 to 2020, sourced from the World Bank, supports this observation. The findings indicate that nations with stark inequalities in various societal aspects, including the economy, opportunities, and politics, tend to have lower climate emissions.

This paradox is further elucidated by the fact that undemocratic countries often have lower overall wealth, and it is this overall economic footprint, rather than equality per se, that most influences carbon emissions. In less democratic settings, wealth tends to be concentrated in the hands of a few, which restricts widespread consumer activity and thus limits emissions. On the other hand, more democratic nations, with their generally higher levels of wealth distributed across a broader population segment, see increased total consumption and, consequently, higher emissions.

This relationship between wealth and emissions is clear and undeniable. Increased national income per capita is directly correlated with higher carbon emissions. The wealthier a society becomes, the more its consumption patterns contribute to environmental degradation. This includes greater consumption of products with significant environmental impacts, such as higher meat consumption over plant-based alternatives.

De Soysa also highlights that greater economic freedom in more equal societies leads to heightened economic activity, increasing both consumption and production emissions. He presents a thought-provoking scenario envisaging a future where countries with currently lower consumption levels begin to emulate those with higher consumption rates, significantly exacerbating global emissions.

Addressing this issue presents a complex challenge often described as a ‘wicked problem’. The moral and practical dilemma is whether to maintain economic disparities to curb emissions, which seems unfair and counterintuitive to global efforts to reduce poverty and inequality. De Soysa argues that we must explore new ways of thinking and innovating to balance reducing emissions and promoting economic equity. He believes that technological advancements offer the most feasible solution to this dilemma. While other factors like wars, pandemics, or financial crises might temporarily reduce consumption and emissions, sustainable and equitable technological developments are crucial for long-term solutions.

However, the development and implementation of such technologies are typically slow and fraught with challenges, often creating disparities between those who benefit and those who are left behind. As we navigate these complexities, the need for innovative solutions that do not compromise on equity or sustainability becomes ever more apparent, making it a central focus for researchers and policymakers alike.

More information: Indra de Soysa, Green with envy? The effects of inequality and equity within and across social groups on greenhouse gas emissions, 1990–2020, World Development. DOI: 10.1016/j.worlddev.2024.106885

Journal information: World Development Provided by Norwegian University of Science and Technology

Recent Research Shows Unlimited Mobile Data Plans Improve Educational Access, Primarily Aiding Low-Income and Rural Families

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A recent study published in the INFORMS journal Management Science has identified unlimited mobile data plans as a potential key factor in reducing digital inequality. This research underscores that removing data caps significantly benefits low-income and rural households, especially regarding their access to educational materials. Traditionally, improvements in internet connectivity were thought to favour wealthier segments of society. Still, this study challenges that notion by demonstrating that less privileged families are likelier to exploit new digital opportunities when free from data restrictions.

Karthik Babu Nattamai Kannan, the lead researcher and an assistant professor of information technology and operations management at Cox School of Business, Southern Methodist University, highlights the difference in usage patterns for educational content. “Low-income households increased their use of education data by the equivalent of five digital textbooks per month, while higher-income households saw an increase of just three,” Kannan explains. This demonstrates a significant leveraging of resources among disadvantaged families, aiming to bridge the educational divide.

The study extends beyond mere entertainment and media consumption. Kannan emphasizes, “This isn’t just about streaming videos or browsing more websites. Disadvantaged households are using this opportunity to access educational resources that can substantially improve their lives, levelling the playing field in ways we haven’t seen before.” The research titled “Can Improvements to Mobile Internet Service Help Reduce Digital Inequality? An Empirical Analysis of Education and Overall Data Consumption,” analyzed data collected over two years in partnership with a primary U.S. telecommunications provider.

The findings revealed that families in rural areas and those with lower incomes experienced the most substantial increases in internet usage—generally, specifically for educational purposes—after transitioning to unlimited data plans. These results support the notion that unlimited data can help bridge the “homework gap,” ensuring that students in underserved communities have the necessary resources to succeed.

The timing of this research is crucial as it aligns with the Federal Communications Commission (FCC) ‘s current deliberations concerning the impact of data caps on internet access as part of Proceeding #23-199: Data Caps in Consumer Broadband Plans. The FCC has recognized the importance of this study by inviting the authors to present their findings via a web conference in October 2025 and to contribute their research papers to the FCC’s system to support the rulemaking process.

Eric Overby, a co-author of the study and a faculty member at the Georgia Institute of Technology, suggests a practical approach to solving this issue that avoids costly infrastructure investments. “We offer a practical solution that focuses on leveraging the widespread use of smartphones, which are already present in over 90% of U.S. households,” he states. This study challenges traditional views and provides hope for millions of Americans struggling to access the internet, arguing that unlimited data is more than a luxury—it is a crucial lifeline for communities on the wrong side of the digital divide. Through these findings, the researchers urge policymakers and telecommunications providers to prioritize digital equity and enhance access to educational resources across all demographics.

More information: Karthik Babu Nattamai Kannan et al, Can Improvements to Mobile Internet Service Help Reduce Digital Inequality? An Empirical Analysis of Education and Overall Data Consumption, Management Science. DOI: 10.1287/mnsc.2022.03770

Journal information: Management Science Provided by Institute for Operations Research and the Management Sciences

The Impact of Domestic Violence on Women’s Career and Educational Opportunities

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A recent study has unveiled the profound impact domestic violence has on women’s employment, often leading to their complete withdrawal from the workforce. It reveals that women affected by such violence typically work fewer hours and receive lower wages compared to their counterparts who have not suffered similar abuse. This disparity, known as the ‘employment gap’, is notably significant, with data showing that only 72 per cent of women who have faced economic abuse in the last five years remain employed, as opposed to 81.4 per cent of those who have not experienced such abuse.

The study, titled “The Cost of Domestic Violence to Women’s Employment and Education”, utilises new data sources to quantify for the first time the severe repercussions of domestic violence on the employment and educational status of Australian women. This groundbreaking research was spearheaded by Dr Anne Summers AO, a distinguished feminist and journalist who currently holds the position of Professor of Domestic and Family Violence at the University of Technology Sydney. The project received substantial support from the Paul Ramsay Foundation.

The findings indicate that more than 60 per cent of women currently experiencing domestic violence are employed. In the fiscal year 2021-22, this translated to over 704,000 women between the ages of 18 and 64 who had undergone partner violence, emotional abuse, or economic abuse in the preceding five years. These women often face relentless pressure from their partners to either resign from their jobs or reduce their working hours. This pressure is even more intense from former partners, with the 2021-2022 Personal Safety Survey reporting that 451,000 women had ex-partners who attempted to control their work and earnings. Women still living with an abusive partner are not spared, with 30,700 reporting that their current partner has tried to maintain their employment and earnings as well.

Moreover, the report also sheds light on an ‘education gap’. The Australian Longitudinal Study on Women’s Health reveals a nearly 15 per cent difference by the age of 27 in university degree attainment rates between victim-survivors and other women. This gap has dire consequences, potentially reducing lifetime earnings by up to 41 per cent compared to women who have achieved higher education. The sabotage of their educational pursuits by violent partners often triggers depression, shame, and stress, leading many to abandon their studies.

These gaps represent significant hindrances to women’s substantial strides in workforce participation and university attainment over recent decades. The report, a sister study to “The Choice: violence or poverty”, illustrates how extensive numbers of women are either not joining the labour force, reducing their working hours, or quitting their jobs entirely due to domestic violence. Consequently, both the personal advancement of these women and the broader historical progress of women are put at risk, impacting Australia’s economic and social development profoundly.

Key findings from the report include: Domestic violence has a long-lasting effect on women’s earnings, with a noticeable decline in full-time employment often persisting for at least five years. For young women, domestic violence is associated with a 9.1 per cent reduction in full-time employment rates. Domestic violence results in a significant 9.7 per cent decrease in university degree attainment. Victim-survivors report considerably higher rates of financial distress, with 44 per cent struggling to meet household expenses and 28 per cent seeking financial help from family or friends, compared to just 7 per cent of women who have not experienced violence. In 2021–22, women who had encountered partner violence or abuse in the past five years had a 5.3 per cent lower employment rate compared to those who had not. The gap was even wider at 9.4 per cent for women who had recently endured economic abuse. Nearly 35 per cent of women who were employed at the time they faced domestic violence took leave from work, averaging 31 days off following the incident.

Dr Summers stressed that the economic toll faced by women of all ages who experience domestic violence is severe. “Domestic violence isn’t just a private issue – it’s a significant workplace and university problem that demands immediate action,” she commented. “Too many women are forced to choose between enduring violence or facing grave economic repercussions.” Summers further highlighted that domestic violence severely restricts women’s participation in the economic life of the country. “Women are compelled to leave their jobs, work fewer hours, earn less, and struggle to support themselves and their children if they decide to leave the violent relationship,” she explained. “Employment and education are not merely means of empowerment; they are vital lifelines.”

Professor Kristy Muir, CEO of the Paul Ramsay Foundation, emphasised the need for urgent systemic interventions to protect women’s access to economic independence. “The evidence clearly shows that too many women pay a high economic price, in addition to the physical, emotional, and psychological harm caused by domestic violence,” she stated. “This report serves as another urgent call to action. Economic abuse and its detrimental impact on women’s livelihoods are forms of violence that can no longer be ignored.”

More information: Anne Summers et al, The Cost of Domestic Violence to Women’s Employment and Education, University of Technology Sydney. DOI: 10.71741/4pyxmbnjaq.28489736

Require a Business Strategy? Consult AI

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From Wall Street trading to the structured complexities of warehouse logistics, artificial intelligence has continually demonstrated its superiority over human capabilities in various sectors. The latest research led by Texas McCombs ventures into a realm previously unexplored, where AI competes against humans in high-level business strategy-making. Harsh Ketkar, an assistant professor of management, has found that AI not only matches but often exceeds the capabilities of humans in enhancing the speed, quality, and scope of strategic analysis. In tests involving human creators and evaluators of business strategies, conducted alongside Felipe Csaszar from the University of Michigan and Hyunjin Kim from INSEAD, AI showcased its prowess, equally challenging or surpassing its human competitors.

AI’s capabilities extend beyond drafting strategies; it is proficient in critiquing existing strategies and proposing viable alternatives. Ketkar highlights AI’s potential as a strategic sparring partner, capable of generating innovative ideas that human strategists may not easily envision. This can be particularly beneficial for executive teams, aiding them in overcoming the often invisible barriers that obstruct strategic insight, thus enhancing decision-making processes across the board.

This pioneering study was inspired by the financial trading sector, where algorithms now dictate 78% of trading decisions, a realm once dominated by human intuition and experience. This led to a curiosity about AI’s potential in strategic decision-making—a field that demands a deeper, more nuanced level of analysis and judgment, skills that are traditionally cultivated through extensive professional experience. How effectively could machines emulate or even improve upon these sophisticated tasks?

Ketkar and his team embarked on two experiments to explore this question. The first experiment involved collaborating with a European startup accelerator, examining business plans that were either accepted or rejected between 2021 and 2022. Using GPT 3.5, they created AI-generated versions of these plans, which 250 seasoned investors and managers evaluated. These evaluators rated the AI-generated plans higher across multiple criteria, highlighting a greater likelihood of these businesses being accepted into the accelerator and showing increased interest in initiating meetings and investing in these startups.

The second experiment reversed the roles: AI was used to assess business plans instead of creating them. The team partnered with a prestigious business school’s startup competition and selected 138 all-text business plans from previous competition cycles. Each plan was evaluated by GPT, using criteria that mirrored the real-world judging process. The results were astonishing, with AI’s evaluations correlating strongly with those of experienced human judges, often surpassing them in predicting the ultimate success of business plans.

These findings suggest a transformative potential for AI in strategic planning. Venture capitalists could use AI to streamline the evaluation of business proposals, potentially accelerating the decision-making process for startup funding. Similarly, accelerators could enhance their application review processes, and entrepreneurs could employ AI to refine and test their strategic plans, benefiting from its capacity to simulate complex scenarios and propose innovative solutions.

As AI becomes more integrated into strategic planning, it could give companies a competitive edge, enhancing their overall performance. This shift could lead to the development of new strategic frameworks, fundamentally altering the practice and perception of strategy-making. The advent of AI in strategic roles suggests a future where strategic decision-making is about human insight and the collaborative interplay between human creativity and machine intelligence. This dynamic could redefine the landscape of business strategy.

More information: Felipe Csaszar et al, Artificial Intelligence and Strategic Decision-Making: Evidence from Entrepreneurs and Investors, Strategy Science. DOI: 10.1287/stsc.2024.0190

Journal information: Strategy Science Provided by University of Texas at Austin

Remote Employment: A Defence Against Gender Bias

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Having employees physically present in the office provides businesses and their staff numerous benefits, including enhanced team collaboration and informal mentorship opportunities. However, as organisations increasingly urge employees to return to office settings, it’s crucial to acknowledge the unique challenges this poses for women, particularly in terms of heightened exposure to gender discrimination. This is highlighted in a recent study by the University of Toronto’s Rotman School of Management.

The study, led by Laura Doering, an associate professor of strategic management, and András Tilcsik, a professor and the Canada Research Chair in Strategy, Organizations, and Society, surveyed over 1,000 professional women engaged in hybrid work roles. The findings revealed that these women consistently faced less gender discrimination during remote work interactions compared to those occurring in person.
The discrepancy in experiences was noticeable and significant; 31% of respondents reported gender discrimination while in the office, in contrast to 17% who experienced it when working from home. Further statistical analysis by the researchers accentuated this gap, particularly among women who predominantly worked with men. In such environments, the likelihood of encountering gender discrimination on-site soared to 58%, compared to just 26% remotely.

The study also shed light on age-related differences in experiences of gender discrimination. Women under the age of 30 reported higher rates of discrimination in the office—31% compared to 26% among older women—with only 14% of the younger cohort experiencing it in remote settings.

Professor Doering pointed out the rarity and consistency of these findings across various work conditions and demographic segments. Women aged between 18 and 75 were asked to describe their experiences at work, focusing on eleven different types of gender-based slights and offences. These ranged from receiving inappropriate attention to having their ideas overlooked or appropriated, being assigned irrelevant tasks, exclusion by colleagues, and being addressed disrespectfully during meetings.

Given the uniformity in responses, the researchers concluded that remote work acts as a protective barrier and a haven against the pervasive issue of gender discrimination for many women. They suggest that the prevalent gender discrimination in physical workspaces could deteriorate women’s job satisfaction and increase burnout rates, potentially complicating efforts to retain talented employees and negatively impacting team dynamics over time.

However, it’s important to note that while the findings advocate for retaining remote work options to mitigate gender discrimination, they do not propose it as a definitive solution. Professor Doering emphasised the need for a deeper exploration into the root causes of gender discrimination and urged managers to address these underlying issues directly rather than relegating women to remote roles as a mere workaround. This research casts light on the protective effects of remote work. It underscores leaders’ need to actively combat workplace biases and create a more inclusive and equitable work environment.

More information: Laura Doering et al, Location Matters: Everyday Gender Discrimination in Remote and On-site Work, Organization Science. DOI: 10.1287/orsc.2022.16949

Journal information: Organization Science Provided by University of Toronto, Rotman School of Management