Sellers offer larger discounts for similar names

Would you sell your old bike for a lower price to a buyer called Adam than you would to a John? Or for less to an Annette than to a Claire? If your own first name starts with 'A', you might. In fact, new work in the Journal of Behavioural and Experimental Economics suggests that you could be willing to accept around 5% less from a buyer whose first name shares the same initial as your own. 

The 'name letter effect' (NLE) is the finding that people's choices are affected by whether the initial of the first name of the person they're interacting with matches or is different to their own. It's thought to be driven by the fact that a person's name is an important aspect of their identity, and that we like to maintain a positive self-image. But while the NLE has been reported in studies on everything from career choices to judicial sentencing decisions, as well as brand preferences and purchasing decisions, there has been little research into how it affects seller behaviour, write Arie Sherman and Guy Barokas at the Ruppin Academic Center in Israel.

To explore this, the pair ran studies using Yad-2, the biggest internet platform in Israel for selling used goods, such as bikes, furniture, and electronic devices. They note that it's common for sellers to advertise items on Yad-2 at a higher price than they are willing to accept, and also for buyers to enquire about the lowest price that a seller would accept.

For the first study, Sherman and Barokas approached 702 sellers with one of three types of WhatsApp message. Some sellers received a simple message from someone with the same first initial as their own. So, for example, to a seller called Rachel received a message that read, 'Hi, my name is Riki. I saw your ad and would like to know the final price for the product. Thanks.' Some sellers received the same enquiry but without any mention of the sender's name. The final group received a message from someone with a different first name initial. 

Sherman and Barokas found that sellers were more likely to offer some level of price reduction in response to the initial-matched, NLE messages than to either of the other two types. Also, only about a quarter of the messages from the other two groups were offered a price reduction of more than 10%, while about 40% of the NLE messages received this level of discount. The maximum price reduction was also bigger in the NLE group than the other two, giving the NLE an overall value of about 4-5% of the product's initial price. 

In a subsequent study, the researchers found that sellers didn't give discounts to buyers who were (or who seemed to be) the same gender or ethnicity as themselves, only to buyers with the same first name initial. They also found that sellers with a common initial letter — found in almost 20% of first names in Israel, and equivalent to an 'A' in English — were just as susceptible to the name letter effect as sellers with a less common initial.

The researchers then switched to a within-subjects design. They identified a fresh group of sellers, and sent two WhatsApp messages to each one. One message came from someone with a matching initial. For some, the other message was from someone whose first name initial didn't match. For others, the second message was anonymous. In both experiments, the researchers again found a name letter effect, with better prices for the initial-matched messages. 

Overall, the results from these studies suggest that the monetary value of the NLE is between 3.5% and 5% of the product's initial market price. This puts a value on the psychological benefits of selling to someone with the same initial, which the researchers suggest results from the basic desire to feel good about oneself: "Sellers agree to sell their products at a lower price to customers who make them feel good about themselves by sharing their first letter with them." 

Though limitations aren't explored in depth, replications in other cultures or with those who speak different languages may extend upon these findings. For example, it's unclear to what extent this effect may be present in languages such as Japanese, where names are constructed from many more potential characters, making a written match rarer and potentially influencing the strength of the effect. 

This name letter effect on selling could certainly be having an impact in the real world, though, and not just on sales of second hand items. Though the name letter effect would make no difference to prices in high street stores, it could influence prices of other goods and services, such as car repairs, or cleaning or gardening, for example. If sellers are aware that this effect exists, they can at least be prepared for it — and, if they want to, make a conscious decision to try to over-ride it. 

Read the paper in full: https://doi.org/10.1016/j.socec.2023.102058