Testing evolutionary theory of household consumption behavior in the case of novelty - a product characteristics approach

This article tests and extends the evolutionary theory of household consumption behavior, which is an alternative to neoclassical theory. Evolutionary economists offer novel approaches to the analysis of consumption behavior that emphasize the major role of learning in the evolution of consumer preferences and wants. As a possible inspiration for further progress in evolutionary thought, this paper examines the idea of consumer learning by studying the nature of what consumers should learn in the context of ‘novelty’. Our empirical results regarding novelty during the learning process show that consumers learn the ‘new characteristics’ of consumer goods, contrary to the Lancasterian approach, which suggests that the characteristics space of goods is fixed. We show that during the process of consumption, ‘consumer learning’ extends the characteristics space of consumer goods; this phenomenon is far from negligible and differs across product types. Moreover, our results show that the emergence of new characteristics cannot be modeled as a Poisson process because these new characteristics exhibit clear interdependence over time.     

Fashion’s Effect on Consumer’s Preference Formation

Abstract:

It is widely known that all principles of economics textbooks do not consider advertising much less fashion a demand determinant factor. Fashion’s effect on consumer choice is a critically important topic to the understanding of consumer behavior and decision-making in the “new economy.” The discussion of such issues includes verifying the effect of three important fashion market features on consumer preference formation and choice, namely the length of product life cycle, demand volatility, and impulse purchasing. It seems that time has come to concede that fashion firms, especially those producing fast or “junk” fashion, if you will, have successfully been affecting consumer preferences and have manipulated consumer choices for the sake of their own interests. Such a goal has been achieved by exploiting the fashion market features by employing specific marketing strategies, within the framework of supply chain agility, such as product remodeling, product customization, and revisions or innovation.     

Advertising,learning, and consumer choice in experience good markets: an empirical examination*

This article empirically analyzes different effects of advertising in a nondurable, experience good market. A dynamic learning model of consumer behavior is presented in which I allow both “informative” effects of advertising and “prestige” or “image” effects of advertising. This learning model is estimated using consumer level panel data tracking grocery purchases and advertising exposures over time. Empirical results suggest that in this market, advertising's primary effect was that of informing consumers. The estimates are used to quantify the value of this information to consumers and evaluate the welfare implications of an alternative advertising regulatory regime.     

An evolutionary theory of household consumption behavior

Evolutionary economics badly needs a behavioral theory of household consumption behavior, but to date only limited progress has been made on that front. Partly because Schumpeter’s own writings were focused there, and partly because this has been the focus of most of the more recent empirical work on technological change, modern evolutionary economists have focused on the “supply side”. However, because a significant portion of the innovation going on in capitalist countries has been in the form of new consumer goods and services, it should be obvious that dealing coherently with the Schumpeterian agenda requires a theory which treats in a realistic way how consumers respond to new goods and services. The purpose of this essay is to map out a broad alternative to the neoclassical theory of consumer behavior.     

IMPROVING THE ANALYTICAL AND DATA FRAMEWORK OF THE GOVERNMENT SECTOR FOR NATIONAL GOALS ACCOUNTING*

Provision of “market goods” follows the decision rules of traditional microeconomics; pricing and resource allocation for such goods tend towards Pareto optimality. The provision of “collective goods,” by contrast, depends on political (or quasi-political) collective decision processes; beneficiaries often receive a share of collective goods free of charge or well below average or marginal (private or social) costs. No inherent tendency towards optimality may be presumed and separate analysis of collective goods becomes an essential part of national goals accounting. The national-income-accounts (NIA) distinction between personal consumption expenditures (PCE) and government purchases of goods and services corresponds roughly to a division between market goods bought by the consumer and a major category of “collective goods” (i.e. “public goods” provided by government). However, a significant proportion of PCE represents “collective goods” paid for by government, business, or nonprofit organizations and provided on behalf of the consumer, whereas a part of NIA government purchases represents services paid for by the consumer (i.e. “market goods”). This article develops operationally meaningful distinctions among “market goods,”“collective goods,” and “tied aid” (a mixed category with market-good and collective-good characteristics). These distinctions are determined by the nature of the decision processes–rather than by the characteristics of the beneficiary or the supplier. This classification is related to the national income accounts and major discrepancies are pinpointed. The blurring of the distinction among market goods, collective goods and tied aid is found to be most consequential in the NIA treatment of “education” and “medical care” services. NIA data for these two services are restructured for national goals accounting purposes in order to illustrate both the quantitative importance and the empirical feasibility of classifying benefits by their respective decision processes.     

Is there a quality bias in the Canadian CPI? Evidence from microdata

Rising consumer prices may reflect shifts by consumers to new higher‐priced products, mostly for durable and semi‐durable goods. I apply Bils’ (2009) methodology to newly available Canadian consumer price data for non‐shelter goods and services to estimate how price increases can be divided between quality growth and price inflation. I find that less than one third of observed price increases during model changeovers should be attributed to quality growth. This implies overall price inflation close to inflation measured by the official index. I conclude that, according to Bils’ methodology, the quality bias is not an important source of potential mismeasurement of CPI inflation in Canada.     

Aggregation and pairwise aggregation of demand when the distribution of income is fixed

This paper derives necessary and sufficient conditions for “pairwise aggregation” of the demand functions of a group of consumers (conditions under which the mean demand for each pair of consumers satisfies the Slutsky restrictions) when the distribution of income is fixed. The sufficient conditions imply existence of a “representative” competitive consumer whose demand is the mean demand of the group. The necessary conditions imply that such a representative consumer exists for every fixed income distribution only if the consumers have homothetic preferences or, alternatively, if for each price vector, all the consumers' income expansion paths lie in the same plane.     

The Gain from International Trade in Pool Goods and Private Goods

It is well known that perfectly competitive free trade is potentially beneficial for all countries if all goods are both rivalrous and excludable in consumption (“private goods”) and recently (2011) the proposition has been modified to accommodate non‐rivalrous and non‐excludable goods (“public goods”), as well as non‐rivalrous and excludable goods (“club goods”). In the present paper the proposition is modified again, to accommodate rivalrous and non‐excludable goods (“pool goods”). The primary focus is on ocean fisheries, access to which is shared (not necessarily equally) by all countries. However the central proposition to be established is valid for all international pool goods.     

CONSUMER SERVICES PROVIDED BY BUSINESS THROUGH ADVERTISING-SUPPORTED MEDIA IN THE UNITED STATES

The purpose of this paper is to examine and attempt to solve a longstanding “puzzle” in national economic accounting. Radio and television broadcasting are services clearly designed for and used by consumers but not purchased by them and, consequently, not counted in personal consumption expenditures (PCE); the costs of broadcasting (and a part of the costs of newspaper and magazine publication) are not counted in final product but are counted as intermediate expenses in the manufacture and distribution of advertised products. An important result of this treatment is that an increase in broadcasting services will not increase real product, but will be reflected as price increases in advertised goods. Are consumer services provided by advertisers properly handled in the conventional accounts? How should they be valued? If their value is to be added to PCE, where does the offsetting income originate? The paper argues that the puzzle is resolved by recognizing the nonmarket exchange between the consumer and the broadcaster; the consumer provides the reception and display of audiovisual advertisements in his home in return for broadcast entertainment. The exchange rate-e.g. 501/2 minutes of entertainment for 91 minutes of commercial messages in “prime time”-is established in the United States by the National Association of Broadcasters. Similar exchanges occur between consumers and radio broadcasters, newspaper and magazine publishers. This concept is used as the basis for a new treatment shown in abbreviated sample accounts. Estimates for the U.S. in 1976 are included.     

Time inconsistency and alcohol sales restrictions

Restrictions on alcohol sales hours or days are commonly used tools in order to reduce alcohol consumption. However, a forward-looking consumer can buy in advance, and thereby mostly undo the impact of the restriction. I study whether time inconsistent consumer preferences can provide a justification for restrictions on alcohol sales time. I estimate a demand model, which allows a fraction of consumers to be time inconsistent, using scanner data of beer purchases and other shopping behavior. According to the estimation results, 16% of regular beer buyers, or only 3% of all consumers, behave as if they are time inconsistent. I find that in terms of consumer welfare, the sales restriction may be welfare improving, but is worse than increasing taxes.     

The roles of relative prices,interest rates,and bequests in the consumption function

This paper investigates the roles of relative prices, interest rates, inflation expectations and bequests in the determination of consumer expenditures for four goods in the U.S. The framework employed is a life-cycle extension of the Linear Expenditure System, in which relative prices, wealth, labor income, the nominal interest rate, and anticipated rates of inflation for each good are major arguments. The results provide strong empirical support for the expenditure system employed and suggest a significant role for relative prices and for the bequest motive in shaping saving decisions. We also find that expenditure decisions respond to both interest rates and anticipated inflation in a “Fisherian” fashion, but that the interest elasticity of saving is quite low and of uncertain sign. Our model also provides an estimate of the consumer's “horizon,” defined in the sense of Friedman.     

体验消费与"享用"体验

体验消费是指在一定的环境氛围中,消费者对物品和服务的"享用"关系.体验消费可分为积极和消极的体验消费形式,其价值可区分为自我实现(1)和自我实现(2).体验消费凸显享用性,以其注重消费的内在化、精神化、生态化、创新化的特性而成为人们生活殷实的一个象征,并使体验者不断提升到更高的消费境界.在全面建设小康社会大背景下,企业提供能诱发和唤醒人们体验的产品和服务,等于为消费者提供了享用价值,也为我国经济增长提供了新的契机.     

消费文化视角下的《流沙》主人公海尔格

从消费文化的角度,通过分析生活在消费社会中的《流沙》主人公海尔格的消费品地位及其所做挣扎,来揭示消费社会中女性主体性构建失败的原因,并指出其对当下女性成功构建其主体性的意义。     

Social welfare and the unrepresentative representative consumer

If, for all prices, income distribution is optimal for a planner with a social welfare function, then aggregate demand is the same as that of a single “representative consumer” whose preferences over aggregate consumption are the same as the planner's. This paper shows that the converse is false. Aggregate demand may be the demand function of a representative consumer although the income distribution is not optimal for any social welfare function. The representative consumer may be Pareto inconsistent, preferring situation A to B when all the actual consumers prefer B to A. We give conditions under which existence of a representative consumer implies that the income distribution satisfies first order conditions for optimality. Satisfying the first order optimality conditions for an additively separable social welfare function is essentially equivalent to aggregate demand for every pair of consumers having a symmetric Slutsky matrix.     

You Are What You Eat: The Social Economy of the Slow Food Movement

Recent work by Schor revives concerns raised by Veblen and Hirsch over the destructive consequences of competitive consumption. In contrast, Twitchell argues that increased access to commodities as symbols of luxury signals a democratization of class and social status. Rather than playing the role of dupes, consumers are active co-conspirators in the creation and maintenance of luxury goods markets. While flawed, each of these perspectives has something important to offer to social economists interested in understanding consumption. A key question for social economists is whether material pleasure and the symbolic expression of identity through consumer goods is compatible with a more politicized, socially conscious consumption ethos. Food consumption offers a fruitful starting point for pursuing this issue. I begin by examining food and its symbolic role in identity formation. I then consider the Slow Food movement and explore the ways in which it maintains a central role for material pleasure while promoting a socially and environmentally conscious stance toward consumption.     

AN OPTIMAL TAX TREATMENT OF LEVIATHAN*

This paper constructs a model in which taxation and public expenditure decisions are made by two decision makers: a “benevolent planner,” who treats all consumers equally in the measurement of welfare; and a “Leviathan planner,” who places more weight on the utilities of “favored consumers.” The benevolent planner can restrict the Leviathan planner's power to tax, but cannot control the allocation of expenditures between desirable public goods and income transfers to favored consumers. Several types of tax restrictions are shown to be welfare-improving from the benevolent planner's viewpoint. These restrictions include a reduction in the size of the tax base, although administrative costs already prevent the Leviathan planner from taxing all commodities.     

THE TREATMENT OF “HOME OWNERSHIP” IN THE CPI*

This paper explores the imputed service price approach to the pricing of the services of consumer-owned-and-used durables in the construction of the consumer price index, using the services of owner-occupied housing as an illustration. A theoretical framework for analyzing this question is first developed. Certain practical problems are then discussed. The conceptual difficulty of constructing an appropriate rate of return on the basis of available data on interest rates and house prices, in the context of inflation, is explored. Two arguments are advanced that statistical agencies ought not to follow the imputed service price approach in pricing the services of owner-occupied dwellings and other consumer durables. On the one hand, nominal interest rates will, in any short period, reflect monetary policy and not any change in the money “rental” of owner-occupied houses. Second, movements in nominal interest rates will also reflect changes in the money price of pure consumption goods, as well as changes in the money price of houses. The argument is extended to other consumer durables and, in the limiting case, to monetary balances, and it is concluded that in all but trivial cases the application of the service price approach leads to price movements of little or no meaning.     

When do market games have transferable utility?

A pure exchange economy generates a “market game” in which the allocations achievable by any coalition are determined by the initial endowments of its members. Subject to certain regularity conditions, it is shown that for a market game it is possible to find utility representations for each consumer so that the game can be treated as a game with transferable utility if and only if indirect utility of all consumers can be represented in the Gorman polar form. This is the class for which aggregate demand behaves as if it were the demand of a single consumer.     

An experimental study of price dispersion

We report an experiment examining a simple clearinghouse model that generates price dispersion. According to this model, price dispersion arises because of consumer heterogeneity—some consumers are “informed” and simply buy from the firm offering the lowest price, while the remaining consumers are “captive” and shop based on considerations other than price. In our experiment we observe substantial and persistent price dispersion. We find that, as predicted, an increase in the fraction of informed consumers leads to more competitive pricing for all consumers. We also find, as predicted, that when more firms enter the market, prices to informed consumers become more competitive while prices to captive customers become less competitive. Thus, our experiment provides strong support for the model's comparative static predictions about how changes in market structure affect pricing.