Consumer choice and revealed bounded rationality

We study two boundedly rational procedures in consumer behavior. We show that these procedures can be detected by conditions on observable demand data of the same type as standard revealed preference axioms. This provides the basis for a non-parametric analysis of boundedly rational consumer behavior mirroring the classical one for utility maximization.     

Consumer flexibility,data quality and location choice

We analyze firms’ location choices in a Hotelling model with two-dimensional consumer heterogeneity, along addresses and transport cost parameters (flexibility). Firms can price discriminate based on perfect data on consumer addresses and (possibly) imperfect data on consumer flexibility. We show that firms’ location choices depend on how strongly consumers differ in flexibility. Precisely, when consumers are relatively homogeneous, equilibrium locations are socially optimal regardless of the quality of customer flexibility data. However, when consumers are relatively differentiated, firms make socially optimal location choices only when customer flexibility data becomes perfect. These results are driven by the optimal strategy of a firm on its turf, monopolization or market-sharing, which in turn depends on consumer heterogeneity in flexibility. Our analysis is motivated by the availability of customer data, which allows firms to practice third-degree price discrimination based on both consumer characteristics relevant in spatial competition, addresses and transport cost parameters.     

Consumer choice and information : New experimental evidence

Many laws and regulations aimed at safeguarding consumers deal with the amount and kind of product information that consumers receive. Implicit in these regulations is the belief that consumers can make use of the appropriate information, provided only that it is made available. Recently a number of authors have argued that consumer decisionmaking is subject to consistent biases, suggesting poor purchase decisions may result even with access to the relevant information. Indeed some critics have argued that consumers may be subject to information overload so that they may make worse decisions with extra information than without it. The experimental results presented in this paper address some of these issues. The results suggest that untrained people can use simplifying strategies in quite complicated decision problems. Also, while information overload clearly can occur, the subjects in our experiments appeared able to ignore unnecessary or unwanted information.     

Consumer valuation of energy-saving features of residential air conditioners with hedonic and choice models

The promotion of energy-efficient appliances is necessary to reduce the energetic and environmental burden of the household sector. However, many studies have reported that a typical consumer underestimates the benefits of energy-saving investment on the purchase of household electric appliances. To analyze this energy-efficiency-gap problem, many scholars have estimated implicit discount rates that consumers use for energy-consuming durables. Although both hedonic and choice models have been used in previous studies, a comparison between the two models has not yet been made. This study uses point-of-sale data about Japanese residential air conditioners and estimates implicit discount rates with both hedonic and choice models. Both models demonstrate that a typical consumer underinvests in energy efficiency. Although choice models generally estimate a lower implicit discount rate than hedonic models, the latter models estimate the values of other product characteristics more consistently than choice models.     

Consumer Rationality and Consumer Sovereignty

Important social benefits of the market system are predicated on the assumption that consumers can effectively pursue their interest in the marketplace. Cause for concern exists to the extent that high consumption expenditures lead to relatively low levels of personal savings in the U.S. To the extent that they do, in fact, over spend, consumers appear to deviate from economic assumptions of rationality. This paper examines four conceptions of rationality (two variants of rational choice theory, institutionalism, and one derived from economic sociology), with a view to evaluating implications for consumer sovereignty under each. By explicitly accounting for differences among individuals, economic sociology appears to offer more realistic policy solutions.     

消费者金融行为、消费者金融教育和消费者福利

消费者金融行为的研究是一个多学科的研究领域,并在近十年来开始得到主流经济学和金融学的重视。消费者金融行为的研究集中在如何定义、描述、理解和预测、改变、发展,以及比较消费者的金融行为。本文从上述六个方面对美国关于消费者金融行为的研究进行了简要综述,并讨论了消费者金融行为与消费者金融教育、消费者福利之间的关系。最后,对中国消费者金融学的研究提出了几点建议,希望对中国消费者金融学领域的发展有所贡献。     

Bundling, product choice, and efficiency: Should cable television networks be offered à la carte?

We conduct a numerical analysis of bundling’s impact on a monopolist’s pricing and product choices and assess the implications for consumer welfare in cable television markets. Existing theory is ambiguous: for a given set of products, bundling likely transfers surplus from consumers to firms but also encourages products to be offered that might not be under à la carte pricing. Simulation of “Full À La Carte” for an economic environment calibrated to an average cable television system suggests that consumers would likely benefit from à la carte sales. If all networks continued to be offered, the average household’s surplus is predicted to increase by $6.80 (65.6%) under à la carte sales (despite a total bundle price that almost doubles) and reduced network profits would have to be such that 41 of 50 offered cable networks have to exit the market to make her indifferent. Simulation of a “Theme Tier” scenario provides intermediate benefits. The incremental marginal costs to cable systems of à la carte sales and its impact in the advertising market and on competition are important factors in determining consumer benefits.     

Modelling television programming choices

The paper extends Waterman's application of Salop's monopolistically competitive model of circular product space to television programming, by introducing considerations of a program's breadth of appeal and consumer intensity of demand in the analysis of programming choices. The effects of external cultural benefits associated with domestic programming are also examined. Consistent with the findings of previous researchers, the model illustrates the tendency of monopolistically competitive commercial broadcasters to discard viewers' intensity of demand and external benefits and thus supply programs that may not maximise social welfare. © 1997 Elsevier Science B.V.     

Consumer debt and unemployment

We present evidence that US consumer debt has varied inversely with unemployment rates since 1990, potentially reflecting responses by households and/or lenders to adverse labour market conditions, and helping explain why consumer debt recently fell despite low interest rates. For several measures of debt, unemployment exhibits greater explanatory power and economic significance than interest rates.     

State promotion of high-definition television

Governments have used a number of mechanisms to support research and production in domestic industries that are considered strategic. In recent years the Japanese system of administrative guidance and support for pre-competitive research joint ventures has arguabh proved the most successul High-dgfnition teleuislon ( H D V provides an interesting new case study in government support for high-tech industries. Wzile the failure of the EC's venture in this jeld is perhaps unsurprising, the MUSE pryect in Japan has suffered a similar fate. Success in HDTV har been achieved by the US government's novel use ofpre-competitive contests in which domestic and overseas companies are free to form consortia and to arrange side-payments which share out the winning 'prize'. This innovation in the state's promotion of innovation may haue wider applications, though its repeated use could inhibit research by individual companies able tojee-ride on the contest winners.     

Financial education via television comedy

We show that television may be able to deliver rudimentary financial literacy in a cost-effective manner. In a controlled experiment, Cambodian garment factory workers were randomly assigned to one of three treatments: no video (baseline), slideshow and comedy TV show. After the intervention, to examine whether individuals were able to internalize the information that was provided, participants were asked to answer a set of questions on financial knowledge and attitudes. Our results show that participants randomly assigned to the comedy show are significantly more likely to report that they are interested in obtaining more information on savings accounts and are also significantly more likely to open a savings account in the next 6 months. This method of delivery may prove effective particularly for the disadvantaged sections of the population in remote regions of Cambodia.     

Consumer preferences and employment discrimination

Many American managers are under increasing pressure to base hiring and other employment decisions on consumers' preferences. This study attempts, in exploratory fashion, to identify traits of in-person service workers (IPSWs) that are preferred by consumers and could serve as the basis for employment discrimination. Preliminary results indicate that consumers do have strongly held preferences when a transaction involves significant customer-worker interaction. Females appear to be a more likely source of consumer-based discrimination than males for high involvement purchases. Briefly discussed is the question of whether consumers have stereotypical beliefs about IPSWs as well as the implications of these beliefs.     

Uncertainty and Consumer Durables Adjustment

We characterize infrequent durables stock adjustment by consumers who also derive utility from non-durable consumption flows in the presence of idiosyncratic income uncertainty. The data we analyse include subjective future income uncertainty measures, which we use as instruments in the estimation of relevant parameters of heterogeneous consumers' dynamic adjustment problems. The data feature two conceptually distinct sources of variation: cross-sectional heterogeneity of the sampled households' dynamic problems, and history-dependent heterogeneity in their situation during the observation period. We note that the latter should affect the likelihood but not the size of stock adjustment decisions, and find broad support for theoretical predictions in formal selection-controlled regressions based on this insight.     

Railroad Deregulation and Consumer Welfare

Railroad deregulation under the Staggers Act of 1980 generated rate reductions, service enhancements, and other improvements in economic welfare. These benefits appear to be widely shared. There is a low likelihood that some captive shippers pay rates that exceed the rates they would have paid under regulation, some evidence that some captive shippers have paid rates that regulators would judge unreasonable, and strong evidence that captive shippers pay higher rates than non-captive shippers. The source of deregulations benefits is as noteworthy as their size and distribution. The principal benefits of railroad deregulation stem from cost reduction, not just a closer alignment of prices with pre-deregulation cost levels.     

Consumer Inventory and Demand for Storable Goods: New Evidence from a Consumer Survey

In this study, I provide new evidence on consumer inventory from a unique survey on the purchase and inventory of a storable product. I confirm that the predictions regarding the correlations between the key variables of purchase probability, purchase quantity and inventory derived from the standard dynamic models of consumer inventory are consistent with the data. Furthermore, I find that the amount of daily consumption varies within a household across time and depends on inventory holding. The evidence does not conform to a constant consumption rate, which studies often assume for tractability.     

Set-rationalizable choice and self-stability

Rationalizability and similar notions of consistency have proved to be highly problematic in the context of social choice, as witnessed by a range of impossibility results, among which Arrow?s is the most prominent. We propose to rationalize choice functions by preference relations over sets of alternatives (set-rationalizability) and introduce two consistency conditions, and , which are defined in analogy to Sen?s α and γ. We find that a choice function satisfies if and only if it is set-rationalizable and that it satisfies and if and only if it is self-stable, a new concept based on earlier work by Dutta. The class of self-stable social choice functions contains a number of appealing Condorcet extensions.     

Salience and social choice

The axioms of expected utility and discounted utility theory have been tested extensively. In contrast, the axioms of social welfare functions have only been tested in a few questionnaire studies involving choices between hypothetical income distributions. In a controlled experiment with 100 subjects placed in the role of social planners, we test five fundamental properties of social welfare functions to determine the efficacy of traditional social choice models in predicting social planner allocations when presented with choice sets designed to test the axioms of the theory. We find that three properties of the standard social welfare functions tested are systematically violated, producing an Allais paradox, a common ratio effect, and a framing effect in social choice. We find support for scale invariance and a preference for tail-increasing transfers. Our experiment also enables us to test a model of salience-based social choice which predicts the systematic deviations and highlights the close relationship between these anomalies and the classical paradoxes for risk and time.

     

Occupational choice and development

The rise in world trade since 1970 has been accompanied by a rise in the geographic span of control of management and, hence, also a rise in the effective international mobility of labor services. We study the effect of such a globalization of the world?s labor markets. The world?s welfare gains depend positively on the skill-heterogeneity of the world?s labor force. We find that when people can choose between wage work and managerial work, the worldwide labor market raises output by more in the rich and the poor countries, and by less in the middle-income countries. This is because the middle-income countries experience the smallest change in the factor-price ratio, and where the option to choose between wage work and managerial work has the least value in the integrated economy. Our theory also establishes that after economic integration, the high skill countries see a disproportionate increase in managerial occupations. Using aggregate data on GDP, openness and occupations from 115 countries, we find evidence for these patterns of occupational choice.     

Rationality and intertemporal choice

The alleged problems associated with self-control, hyperbolic discounting and other examples of seemingly irrational intertemporal choice are examined in the context of an evolution-based neurobiological model that emphasizes the role of the biological evolution of big brains and language and the cultural evolution of institutions. There is no utility function in the brain; it has no central-planner, in fact, the brain is a self-organized complex system, a decentralized spontaneous order. This spontaneous order is coordinated, much like an economy, by a distributed network that maintains and makes available the discounted net value of various options to decentralized and specialized areas in the brain when making decisions. Further, that decision making is embodied and embedded in the decision making environment. For humans, an important part of that environment is the social environment consisting of institutions and other components of culture. It was, in part, the evolution of this environment that made long-range planning possible. Additionally, it is very often the lack of embedded experience with the environment that leads to what seems to be irrational intertemporal choices. In fact, under close examination the evidence for consistent irrational intertemporal choice is weak.