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• Working Paper | HBS Working Paper Series | 2020

  Consumers Punish Firms that Cut Employee Pay in Response to COVID-19

  Bhavya Mohan, Serena Hagerty and Michael Norton

  Two experiments, including one incentive compatible study, examine the impact of cutting pay for executives versus employees in response to COVID-19 on consumer behavior. Study 1 explores the effect of announcing cuts or no cuts to CEO and employee pay, and shows that firms’ commitment to paying employees their full wages leads to the most positive consumer reactions. Study 2 further examines the effects of announcing employee and CEO pay cuts: though announcing CEO pay cuts in tandem with employee pay cuts can help mitigate the negative effects of employee pay cuts, consumers respond most positively to firms which prioritize paying employees regardless of their strategy for CEO pay. These positive perceptions are mediated by perceptions of financial pain to employees. We discuss the implications of our results for firms and policy-makers during economic crises.

  Keywords: employee furloughs; CEO pay cuts; pay ratios; purchase intention; Health Pandemics; Employees; Wages; Executive Compensation; Consumer Behavior;

  Citation:

  Mohan, Bhavya, Serena Hagerty, and Michael Norton. "Consumers Punish Firms that Cut Employee Pay in Response to COVID-19." Harvard Business School Working Paper, No. 21-020, August 2020.  View Details

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• Article | Journal of Personality and Social Psychology | August 2020

  Does Spending Money on Others Promote Happiness? A Registered Replication Report

  Lara B. Aknin, Elizabeth W. Dunn, Jason Proulx, Iris Lok and Michael I. Norton

  Research indicates that spending money on others—prosocial spending—leads to greater happiness than spending money on oneself (e.g., Dunn, Aknin, & Norton, 2008, 2014). These findings have received widespread attention because they offer insight into why people engage in costly prosocial behavior, and what constitutes happier spending more broadly. However, most studies on prosocial spending (like most research on the emotional benefits of generosity) utilized small sample sizes (n < 100/cell). In light of new, improved standards for evidentiary value, we conducted high-powered registered replications of the central paradigms used in prosocial spending research. In Experiment 1, 712 students were randomly assigned to make a purchase for themselves or a stranger in need and then reported their happiness. As predicted, participants assigned to engage in prosocial (vs. personal) spending reported greater momentary happiness. In Experiment 2, 1950 adults recalled a time they spent money on themselves or someone else and then reported their current happiness; contrary to predictions, participants in the prosocial spending condition did not report greater happiness than those in the personal spending condition. Because low levels of task engagement may have produced these null results, we conducted a replication with minor changes designed to increase engagement; in this Experiment 3 (N = 5,199), participants who recalled a prosocial (vs. personal) spending memory reported greater happiness but differences were small. Taken together, these studies support the hypothesis that spending money on others does promote happiness, but demonstrate that the magnitude of the effect depends on several methodological features.

  Keywords: prosocial spending; Generosity; well-being; replication; Happiness; Behavior; Spending;

  Citation:

  Aknin, Lara B., Elizabeth W. Dunn, Jason Proulx, Iris Lok, and Michael I. Norton. "Does Spending Money on Others Promote Happiness? A Registered Replication Report." Journal of Personality and Social Psychology 119, no. 2 (August 2020).  View Details

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• Working Paper | HBS Working Paper Series | 2020

  Spreading the Health: Americans' Estimated and Ideal Distributions of Death and Health(care)

  Sorapop Kiatpongsan and Michael I. Norton

  The 2010 Patient Protection and Affordable Care Act intensified debates over the role of government in the distribution of healthcare. A nationally-representative sample of Americans reported their estimated and ideal distributions of healthcare (unmet need for prescription medications) and death (gains in life expectancy). Respondents across the demographic and political spectrum wanted mortality and healthcare to be distributed more evenly among the rich and poor than they estimated them to be. For example, respondents estimated that Americans in the poorest quintile lived 1.5 months longer over the previous 20 years while those in the richest quintile lived 4.7 months longer, but reported ideal figures of 2.5 and 3.6 months – both were far more equal than the actual figures: -1.8 and 7.2 months. Despite heated debates about healthcare, Americans share a consensus belief that current disparities in death and healthcare are far from their ideals.

  Keywords: healthcare; mortality; inequality; justice; equity; Health; Health Care and Treatment; Equality and Inequality; Fairness; Public Opinion; United States;

  Citation:

  Kiatpongsan, Sorapop, and Michael I. Norton. "Spreading the Health: Americans' Estimated and Ideal Distributions of Death and Health(care)." Harvard Business School Working Paper, No. 20-114, April 2020.  View Details

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