joowon park & sachin banker

Assistant Professors, Marketing

You’ve got a craving for ice cream and add it to your grocery cart, but when it comes time to check out, you may decide not to buy it after all, depending on what currency you are paying with.

New research from Joowon Park and Sachin Banker indicates that when consumers are paying in cash or credit, they are more likely to indulge in so-called “vice goods” versus when paying in cryptocurrency such as bitcoin.

It’s a growing issue as bitcoin becomes more prevalent.

“Digital wallets such as Apple Pay and Google Pay are growing quickly with consumers as they allow people to ditch the credit cards, memberships, and IDs they need to carry around, while also making transactions contactless,” Banker said. “Cryptocurrency payments can have major advantages in cross-border transactions, where traditional fees and settlement times for international transactions can be prohibitive.”

Park and Banker presented various grocery items to study participants and observed that consumers were willing to purchase “virtue” goods — grocery staples such as bread, milk, eggs, etc. — no matter what currency they were using. But they were more likely to splurge on vice goods such as ice cream, soda and potato chips, when paying cash.

It all comes down to the anticipation of regret. Park and Banker say that because many members of the public see bitcoin as an “investment” as opposed to just another currency, they are more cautious about using it. They don’t want to regret overpaying for that item down the road if bitcoin values suddenly skyrocket.

Take the ice cream, for example. It has a xed price in the grocery store that will remain the same if you pay in cash or with credit. But that $7.99 price tag could be signi cantly more if the price of bitcoin goes up tomorrow. Then you’ve overpaid and lost out on your investment.

These patterns raise concerns for merchants. Companies that facilitate bitcoin transactions address such concerns by allowing merchants to settle payments in any currency they want. For example, a consumer could pay $3 for a cup of co ee by sending a fraction of bitcoin that’s equivalent to $3 at the current USD-bitcoin exchange rate. On the receiving end, the co ee shop can either choose to receive the payment in bitcoin or in USD.

Both Park and Banker agree that we are likely to see more cryptocurrency purchases for all goods — staple or splurge — as consumers and merchants discover the bene ts.

“Bitcoin payment can o er a method of exchange that’s faster, cheaper, and more exible as it involves fewer intermediaries,” said Park. “Compared to a typical credit card payment which takes a few days for a merchant to actually receive the money, bitcoin payment through lightning network technology can be settled within a few seconds. The processing fee merchants pay for bitcoin transactions through lightning network can also be signi cantly lower than that for credit card transactions.”

josh feng Assistant Professor, Entrepreneur & Strategy

It’s no secret that prescription drug prices are skyrocketing. With consumers paying more for medications every month, Josh Feng set out to identify the key actors and forces driving outcomes in prescription drug markets.

“I use data and modeling to understand how actors and regulations interact to determine outcomes that a ect consumers,” Feng said. “A clearer picture of the system can help policymakers craft better policies and regulations.”

A starting point for this line of research was showing that patients taking medication to manage chronic disease stick to the same brand drug at very high rates over time. “If you randomly assign a patient to a drug, they’ll just continue taking it, even if there are cheaper substitutes,” Feng said. “It creates incentives for drug companies to increase prices and to develop slightly modi ed versions of existing drugs to stave o competition from generics.”

His subsequent work analyzed forces including the role of pharmacy bene t managers and how Medicare and Medicaid rules impact the commercial side of the market.

Feng also has a current project that looks at mergers within the pharmaceutical industry. “We often tend to connect mergers to price increases,” he said, “but regulators like the Federal Trade Commission need more information on the types of mergers that lead to increased prices.” Preliminary analysis suggests that regulators play a signi cant role in preventing mergers that lead to price increases.

Feng also has an interest in the broader innovation system. Part of his research looks at the behavior of innovators (inventors and entrepreneurs) and the implications for consumers and economic growth. One particular project studies the relationship between innovators’ backgrounds and the demographics of the consumers they ultimately sell to.

“Innovators tend to create new products that are purchased by people similar to them,” he said. “Given that individuals from low-income backgrounds and women are several times less likely to participate in the innovation system, this likely means fewer new goods and services for individuals from those populations.”

Intellectual property law plays a huge role in the innovation system, and Feng has a particular interest in so-called “patent trolls” — entities whose business model is to buy patents and assert them.

“While we are seeing the incidence of this practice level o a bit, patent trolls took up three-quarters of the cases in U.S. District Courts in the 2010s,” Feng said. His work has found that patent applications that are not scrutinized carefully during examination are more likely to be scooped up by patent trolls, suggesting that trolls are pro ting from legal grey areas rather than helping owners of high quality inventions enforce their patents.