From The Wharton School At The University of Pennsylvania Via “Today” : “How do customers feel about algorithms?”
At
The University of Pennsylvania
Via
1.12.23
Wharton marketing professor Stefano Puntoni. (Image: Knowledge at Wharton)
Many managers worry that algorithms alienate customers. New research from Wharton’s Stefano Puntoni looks at how the attitudes of customers are influenced by algorithmic versus human decision-making.
Customers feel good about a company when its representatives make decisions in their favor, such as approving their loan application or gold member status. But when an algorithm reaches the same favorable conclusion, those warm and fuzzy feelings tend to fade.
This surprising contradiction is revealed in a new paper that examines how customers react differently depending on whether a computer or a fellow human being decides their fate.
This surprising contradiction is revealed in a new paper that examines how customers react differently depending on whether a computer or a fellow human being decides their fate.
In the study, Wharton marketing professor Stefano Puntoni and his colleagues found that customers are happiest when they receive a positive decision from a person, less happy when the positive decision is made by an algorithm, and equally unhappy with both man and machine when the news is bad. Puntoni is a co-author “Thumbs Up or Down: Consumer Reactions to Decisions by Algorithms Versus Humans,” published in the Journal of Marketing Research [below].
“What’s interesting is that if you talk to companies, they’ll often tell you that they’re reluctant to let algorithms make decisions because they are worried about what would happen to customers when things go wrong. But we don’t actually find that. The negative consequences of using algorithms for companies seem to be, in fact, when the news is good,” Puntoni says.
The researchers believe the results can be explained through attribution theory, a psychology term that refers to how people translate their own experiences and perceptions to make sense of their place in the world. Simply put, people have a psychological need to feel good about themselves, and it helps to internalize a good decision and externalize a bad one. When a company representative greenlights a request, customers attribute that to their own exemplary behavior, social status, excellent credit score, or other value-adds to the firm. That’s harder to do when the decision-maker is a bot.
“These decisions are diagnostic of some characteristic of ourselves,” Puntoni says. “People find it easier to internalize the good decision when the decision was made by a person. Now they get what they want, and it feels better to them that it was a human [deciding] than if it was an algorithm.”
Science paper:
Journal of Marketing Research
See the full article here .
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The Wharton School of the University of Pennsylvania is the business school of the University of Pennsylvania, a private Ivy League research university in Philadelphia. Generally considered to be one of the most prestigious business schools in the world, the Wharton School is the world’s oldest collegiate business school, having been established in 1881 through a donation from Joseph Wharton.
The Wharton School awards the Bachelor of Science with a school-specific economics major, with concentrations in over 18 disciplines in Wharton’s academic departments. The degree is a general business degree focused on core business skills. At the graduate level, the Master of Business Administration (MBA) program can be pursued standalone or offers dual studies leading to a joint degree from other schools (e.g., law, engineering, government). Similarly, in addition to its tracks in accounting, finance, operations, statistics, and other academic departments, the doctoral and post-doctoral programs co-sponsors several diploma programs in conjunction with other schools within the University. The college was a pioneer in so-called ‘Executive Education’; custom learning experiences that lead to academic enrichment, however with no standing.
Since the establishment of journalistic rankings, Wharton’s undergraduate and graduate programs have been consistently ranked in the top tier. Its MBA program is ranked No. 1 in the World according to the Financial Times and No. 1 in the United States according to the 2023 U.S. News & World Report ranking. Meanwhile, Wharton’s undergraduate business program has been ranked No. 1 in the United States, and the MBA for Executives No. 2 in the US by U.S. News. MBA graduates of Wharton earn an average $175,000 (USD) first year base pay, the highest of all the leading business schools. Wharton’s MBA program is tied for the highest in the United States with an average GMAT score of 732 (97th percentile) for its entering class.
Wharton School alumni include Tesla, SpaceX, and Twitter CEO Elon Musk, former U.S. President Donald Trump, and billionaire investor Warren Buffett. Current and former CEOs of Fortune 500 companies including Alphabet Inc., Boeing, Comcast, General Electric, Johnson & Johnson, Oracle, Pfizer, PepsiCo, and Tesla are also Wharton School alumni.
Academic life at University of Pennsylvania is unparalleled, with 100 countries and every U.S. state represented in one of the Ivy League’s most diverse student bodies. Consistently ranked among the top 10 universities in the country, Penn enrolls 10,000 undergraduate students and welcomes an additional 10,000 students to our world-renowned graduate and professional schools.
Penn’s award-winning educators and scholars encourage students to pursue inquiry and discovery, follow their passions, and address the world’s most challenging problems through an interdisciplinary approach.
The University of Pennsylvania is a private Ivy League research university in Philadelphia, Pennsylvania. The university claims a founding date of 1740 and is one of the nine colonial colleges chartered prior to the U.S. Declaration of Independence. Benjamin Franklin, Penn’s founder and first president, advocated an educational program that trained leaders in commerce, government, and public service, similar to a modern liberal arts curriculum.
Penn has four undergraduate schools as well as twelve graduate and professional schools. Schools enrolling undergraduates include the College of Arts and Sciences; the School of Engineering and Applied Science; the Wharton School; and the School of Nursing. Penn’s “One University Policy” allows students to enroll in classes in any of Penn’s twelve schools. Among its highly ranked graduate and professional schools are a law school whose first professor wrote the first draft of the United States Constitution, the first school of medicine in North America (Perelman School of Medicine, 1765), and the first collegiate business school (Wharton School, 1881).
Penn is also home to the first “student union” building and organization (Houston Hall, 1896), the first Catholic student club in North America (Newman Center, 1893), the first double-decker college football stadium (Franklin Field, 1924 when second deck was constructed), and Morris Arboretum, the official arboretum of the Commonwealth of Pennsylvania. The first general-purpose electronic computer (ENIAC) was developed at Penn and formally dedicated in 1946. In 2019, the university had an endowment of $14.65 billion, the sixth-largest endowment of all universities in the United States, as well as a research budget of $1.02 billion. The university’s athletics program, the Quakers, fields varsity teams in 33 sports as a member of the NCAA Division I Ivy League conference.
As of 2018, distinguished alumni and/or Trustees include three U.S. Supreme Court justices; 32 U.S. senators; 46 U.S. governors; 163 members of the U.S. House of Representatives; eight signers of the Declaration of Independence and seven signers of the U.S. Constitution (four of whom signed both representing two-thirds of the six people who signed both); 24 members of the Continental Congress; 14 foreign heads of state and two presidents of the United States, including Donald Trump. As of October 2019, 36 Nobel laureates; 80 members of the American Academy of Arts and Sciences; 64 billionaires; 29 Rhodes Scholars; 15 Marshall Scholars and 16 Pulitzer Prize winners have been affiliated with the university.
History
The University of Pennsylvania considers itself the fourth-oldest institution of higher education in the United States, though this is contested by Princeton University and Columbia University. The university also considers itself as the first university in the United States with both undergraduate and graduate studies.
In 1740, a group of Philadelphians joined together to erect a great preaching hall for the traveling evangelist George Whitefield, who toured the American colonies delivering open-air sermons. The building was designed and built by Edmund Woolley and was the largest building in the city at the time, drawing thousands of people the first time it was preached in. It was initially planned to serve as a charity school as well, but a lack of funds forced plans for the chapel and school to be suspended. According to Franklin’s autobiography, it was in 1743 when he first had the idea to establish an academy, “thinking the Rev. Richard Peters a fit person to superintend such an institution”. However, Peters declined a casual inquiry from Franklin and nothing further was done for another six years. In the fall of 1749, now more eager to create a school to educate future generations, Benjamin Franklin circulated a pamphlet titled Proposals Relating to the Education of Youth in Pensilvania, his vision for what he called a “Public Academy of Philadelphia”. Unlike the other colonial colleges that existed in 1749—Harvard University, William & Mary, Yale Unversity, and The College of New Jersey—Franklin’s new school would not focus merely on education for the clergy. He advocated an innovative concept of higher education, one which would teach both the ornamental knowledge of the arts and the practical skills necessary for making a living and doing public service. The proposed program of study could have become the nation’s first modern liberal arts curriculum, although it was never implemented because Anglican priest William Smith (1727-1803), who became the first provost, and other trustees strongly preferred the traditional curriculum.
Franklin assembled a board of trustees from among the leading citizens of Philadelphia, the first such non-sectarian board in America. At the first meeting of the 24 members of the board of trustees on November 13, 1749, the issue of where to locate the school was a prime concern. Although a lot across Sixth Street from the old Pennsylvania State House (later renamed and famously known since 1776 as “Independence Hall”), was offered without cost by James Logan, its owner, the trustees realized that the building erected in 1740, which was still vacant, would be an even better site. The original sponsors of the dormant building still owed considerable construction debts and asked Franklin’s group to assume their debts and, accordingly, their inactive trusts. On February 1, 1750, the new board took over the building and trusts of the old board. On August 13, 1751, the “Academy of Philadelphia”, using the great hall at 4th and Arch Streets, took in its first secondary students. A charity school also was chartered on July 13, 1753 by the intentions of the original “New Building” donors, although it lasted only a few years. On June 16, 1755, the “College of Philadelphia” was chartered, paving the way for the addition of undergraduate instruction. All three schools shared the same board of trustees and were considered to be part of the same institution. The first commencement exercises were held on May 17, 1757.
The institution of higher learning was known as the College of Philadelphia from 1755 to 1779. In 1779, not trusting then-provost the Reverend William Smith’s “Loyalist” tendencies, the revolutionary State Legislature created a University of the State of Pennsylvania. The result was a schism, with Smith continuing to operate an attenuated version of the College of Philadelphia. In 1791, the legislature issued a new charter, merging the two institutions into a new University of Pennsylvania with twelve men from each institution on the new board of trustees.
Penn has three claims to being the first university in the United States, according to university archives director Mark Frazier Lloyd: the 1765 founding of the first medical school in America made Penn the first institution to offer both “undergraduate” and professional education; the 1779 charter made it the first American institution of higher learning to take the name of “University”; and existing colleges were established as seminaries (although, as detailed earlier, Penn adopted a traditional seminary curriculum as well).
After being located in downtown Philadelphia for more than a century, the campus was moved across the Schuylkill River to property purchased from the Blockley Almshouse in West Philadelphia in 1872, where it has since remained in an area now known as University City. Although Penn began operating as an academy or secondary school in 1751 and obtained its collegiate charter in 1755, it initially designated 1750 as its founding date; this is the year that appears on the first iteration of the university seal. Sometime later in its early history, Penn began to consider 1749 as its founding date and this year was referenced for over a century, including at the centennial celebration in 1849. In 1899, the board of trustees voted to adjust the founding date earlier again, this time to 1740, the date of “the creation of the earliest of the many educational trusts the University has taken upon itself”. The board of trustees voted in response to a three-year campaign by Penn’s General Alumni Society to retroactively revise the university’s founding date to appear older than Princeton University, which had been chartered in 1746.
Research, innovations and discoveries
Penn is classified as an “R1” doctoral university: “Highest research activity.” Its economic impact on the Commonwealth of Pennsylvania for 2015 amounted to $14.3 billion. Penn’s research expenditures in the 2018 fiscal year were $1.442 billion, the fourth largest in the U.S. In fiscal year 2019 Penn received $582.3 million in funding from the National Institutes of Health.
In line with its well-known interdisciplinary tradition, Penn’s research centers often span two or more disciplines. In the 2010–2011 academic year alone, five interdisciplinary research centers were created or substantially expanded; these include the Center for Health-care Financing; the Center for Global Women’s Health at the Nursing School; the $13 million Morris Arboretum’s Horticulture Center; the $15 million Jay H. Baker Retailing Center at Wharton; and the $13 million Translational Research Center at Penn Medicine. With these additions, Penn now counts 165 research centers hosting a research community of over 4,300 faculty and over 1,100 postdoctoral fellows, 5,500 academic support staff and graduate student trainees. To further assist the advancement of interdisciplinary research President Amy Gutmann established the “Penn Integrates Knowledge” title awarded to selected Penn professors “whose research and teaching exemplify the integration of knowledge”. These professors hold endowed professorships and joint appointments between Penn’s schools.
Penn is also among the most prolific producers of doctoral students. With 487 PhDs awarded in 2009, Penn ranks third in the Ivy League, only behind Columbia University and Cornell University (Harvard University did not report data). It also has one of the highest numbers of post-doctoral appointees (933 in number for 2004–2007), ranking third in the Ivy League (behind Harvard and Yale University) and tenth nationally.
In most disciplines Penn professors’ productivity is among the highest in the nation and first in the fields of epidemiology, business, communication studies, comparative literature, languages, information science, criminal justice and criminology, social sciences and sociology. According to the National Research Council nearly three-quarters of Penn’s 41 assessed programs were placed in ranges including the top 10 rankings in their fields, with more than half of these in ranges including the top five rankings in these fields.
Penn’s research tradition has historically been complemented by innovations that shaped higher education. In addition to establishing the first medical school; the first university teaching hospital; the first business school; and the first student union Penn was also the cradle of other significant developments. In 1852, Penn Law was the first law school in the nation to publish a law journal still in existence (then called The American Law Register, now the Penn Law Review, one of the most cited law journals in the world). Under the deanship of William Draper Lewis, the law school was also one of the first schools to emphasize legal teaching by full-time professors instead of practitioners, a system that is still followed today. The Wharton School was home to several pioneering developments in business education. It established the first research center in a business school in 1921 and the first center for entrepreneurship center in 1973 and it regularly introduced novel curricula for which BusinessWeek wrote, “Wharton is on the crest of a wave of reinvention and change in management education”.
Several major scientific discoveries have also taken place at Penn. The university is probably best known as the place where the first general-purpose electronic computer (ENIAC) was born in 1946 at the Moore School of Electrical Engineering.
It was here also where the world’s first spelling and grammar checkers were created, as well as the popular COBOL programming language. Penn can also boast some of the most important discoveries in the field of medicine. The dialysis machine used as an artificial replacement for lost kidney function was conceived and devised out of a pressure cooker by William Inouye while he was still a student at Penn Med; the Rubella and Hepatitis B vaccines were developed at Penn; the discovery of cancer’s link with genes; cognitive therapy; Retin-A (the cream used to treat acne), Resistin; the Philadelphia gene (linked to chronic myelogenous leukemia) and the technology behind PET Scans were all discovered by Penn Med researchers. More recent gene research has led to the discovery of the genes for fragile X syndrome, the most common form of inherited mental retardation; spinal and bulbar muscular atrophy, a disorder marked by progressive muscle wasting; and Charcot–Marie–Tooth disease, a progressive neurodegenerative disease that affects the hands, feet and limbs.
Conductive polymer was also developed at Penn by Alan J. Heeger, Alan MacDiarmid and Hideki Shirakawa, an invention that earned them the Nobel Prize in Chemistry. On faculty since 1965, Ralph L. Brinster developed the scientific basis for in vitro fertilization and the transgenic mouse at Penn and was awarded the National Medal of Science in 2010. The theory of superconductivity was also partly developed at Penn, by then-faculty member John Robert Schrieffer (along with John Bardeen and Leon Cooper). The university has also contributed major advancements in the fields of economics and management. Among the many discoveries are conjoint analysis, widely used as a predictive tool especially in market research; Simon Kuznets’s method of measuring Gross National Product; the Penn effect (the observation that consumer price levels in richer countries are systematically higher than in poorer ones) and the “Wharton Model” developed by Nobel-laureate Lawrence Klein to measure and forecast economic activity. The idea behind Health Maintenance Organizations also belonged to Penn professor Robert Eilers, who put it into practice during then-President Nixon’s health reform in the 1970s.
International partnerships
Students can study abroad for a semester or a year at partner institutions such as the London School of Economics(UK), University of Barcelona [Universitat de Barcelona](ES), Paris Institute of Political Studies [Institut d’études politiques de Paris](FR), University of Queensland(AU), University College London(UK), King’s College London(UK), Hebrew University of Jerusalem(IL) and University of Warwick(UK).
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