getting ahead of the joneses when equality increases conspicuous consumption among bottom tier consumers it is widely believed that increasing the equality of material possessions or income in a social group should lead people at the bottom of the distribution to consume less and save more however this prediction and its causal mechanism have never been studied experimentally five studies show that greater equality increases the satisfaction of those in the lowest tier of the distribution because it reduces the possession gap between what they have and what others have however greater equality also increases the position gains derived from status enhancing consumption since it allows low tier consumers to get ahead of the higher proportion of consumers clustered in the middle tiers as a result greater equality reduces consumption when consumers focus on the narrower possession gap but it increases consumption when they focus on the greater position gains i e when consumption is conspicuous social competition goals are primed and the environment is competitive

using extremeness aversion to fight obesity policy implications of context dependent demand this article illustrates how the compromise effect alters consumers selection of soft drinks using three within subject studies we show that extremeness aversion and price insensitivity cause consumers to increase their consumption when the smallest drink size is dropped or when a larger drink size is added to a set as a result rational firms find it best to drop the smaller sizes and add a larger size thus increasing overall consumption after estimating each individual s demand as a function of price and drink size availability policy experiments demonstrate how it is possible to reduce soft drink consumption without additional taxation

generous paupers and stingy princes power drives consumer spending on self versus others this research examines how consumers spending on themselves versus others can be affected by temporary shifts in their states of power five experiments found that individuals experiencing a state of power spent more money on themselves than on others whereas those experiencing a state of powerlessness spent more money on others than on themselves this effect was observed using a variety of power manipulations hierarchical roles print advertisements episodic recall and mental role playing across spending intentions and actual dollars spent and among college and national samples we propose that this effect occurs because power and powerlessness affect the psychological utility of self versus others and this in turn affects the monetary worth allocated to spending on self versus others the research makes novel contributions to appreciating how the spending on the self versus others varies as a function of psychological states and increases our understanding of the role of power in consumer behavior

habit formation in consumer preferences evidence from panel data this paper tests for the presence of habit formation using household data a simple model of habit formation implies a condition relating the strength of habits to the evolution of consumption over time when the condition is estimated with food consumption data from the panel study on income dynamics the results yield no evidence of habit formation at the annual frequency this finding is robust to a number of changes in the specification it also holds for several proxies for nondurables and services consumption created by combining psid variables with weights estimated from consumer expenditure survey data

capital gains in japan their magnitude and impact on consumption this paper estimates the magnitude of net capital gains on household wealth in japan and then conducts an econometric analysis of their impact on consumption using national accounts data for the 1955 93 period it finds that net capital gains on household wealth have been sizeable albeit volatile in japan during this period and that their impact on consumption has been substantial especially during the late 1980s and early 1990s the econometric analysis is one of the first cointegration analyses of japanese consumption behavior and finds strong support for the life cycle permanent income hypothesis copyright 1996 by royal economic society

exact accounting of inventory costs in stochastic periodic review models abstract most stochastic periodic review inventory models calculate inventory costs according to the inventory level at the end of the review cycle however in most cases actual inventory costs accrue at different time points over the course of the cycle suggesting that the outputs of these models might be suboptimal this work proposes a means of overcoming this deficiency by attributing inventory costs to their actual timing formulas are presented for the expected profit and for its corresponding optimality equation in various multi period models that follow complete or partial backlogging with or without spoilage stationary or varying inventory costs within cycle and immediate or postponed revenues we show that the optimality equation of all these model variants is a kind of newsvendor formula with modified demand distribution and cost parameters a simple approximation formula and bounds on the optimal order quantity which are based only on the demand distribution over the entire cycle are presented and combined together into an improved approximation formula numerical examples of a brownian motion demand process demonstrate the benefit of the proposed approximation in comparison to the simple approximation formula

money in the bank feeling powerful increases saving across five studies this research reveals that feeling powerful increases saving this effect is driven by the desire to maintain one s current state when the purpose of saving is no longer to accumulate money but to spend it on a status related product the basic effect is reversed and those who feel powerless save more further if money can no longer aid in maintaining one s current state because power is already secure or because power is maintained by accumulating an alternative resource i e knowledge the effect of feeling powerful on saving disappears these findings are discussed in light of their implications for research on power and financial decision making

a cointegration analysis of the impact of the age structure of the population on the household saving rate in japan this paper analyzes the impact of the age structure of the population on japan s household saving rate by applying cointegration techniques to time series data for the 1955 1993 period it finds th

conspicuous consumption and race using nationally representative data on consumption we show that blacks and hispanics devote larger shares of their expenditure bundles to visible goods clothing jewelry and cars than do comparable whites these differences exist among virtually all subpopulations are relatively constant over time and are economically large although racial differences in utility preference parameters might account for a portion of these consumption differences we emphasize instead a model of status seeking in which conspicuous consumption is used as a costly indicator of a household s economic position using merged data on race and state level income we demonstrate that a key prediction of the status signaling model that visible consumption should be declining in reference group income is strongly borne out in the data for each racial group moreover we show that accounting for differences in reference group income characteristics explains most of the racial difference in visible consumption

wealth and welfare divergent moral reactions to ethical consumer choices this article examines perceptions of low income consumers receiving government assistance and the choices they make showing that this group is viewed differently than those with more resources even when making identical choices a series of five experiments reveal that ethical purchases polarize moral judgments whereas individuals receiving government assistance are perceived as less moral when choosing ethical vs conventional products income earners particularly high income individuals are perceived as more moral for making the identical choice price is a central component of this effect because equating the cost of ethical and conventional goods provides those receiving government assistance some protection against harsh moral judgments when choosing ethically moreover earning one s income drives perceptions of deservingness or the right to spend as one desires those who receive assistance via taxpayer dollars are under greater scrutiny frequently resulting in harsher moral judgments by others in addition to influencing perceptions of individual consumers the results demonstrate that such attributions extend to groups who make ethical choices on others behalf and that these attributions have real monetary consequences for nonprofit organizations

fashionable food a latent class analysis of social status in food purchases abstracta framed field experiment combined with a latent class econometric approach was used to investigate how prestige seeking behaviour influences food choices we propose a theoretical framework to test conspicuous consumption of specialty food products we test the hypothesis empirically by categorizing individuals into unobserved latent classes according to their general prestige seeking behaviour we find evidence of food consumption driven by prestige to the point of becoming a symbol of social status the prestige seeking behaviour seems to be motivated by invidious comparison or higher class individuals seeking to differentiate themselves from lower class individuals and pecuniary emulation or lower class individuals buying prestigious goods in order to be perceived as members of a higher class findings from this study revealed that the effects of differentiating labelling attributes had a higher impact for individuals classified into classes with prestige seeking behaviour to attain an eleva

end of period vs continuous accounting of inventory related costs this paper investigates the effect of using an end of period accounting scheme for inventory related costs when costs actually accrue in continuous time using a simple model we show that i the end of period scheme results in higher than optimal order up to levels and inventory cost if the cost and demand parameters are unchanged and ii it is possible to replicate both the optimal base stock level and its cost by selecting the values of the cost or demand parameters judiciously the cost adjustments often require extreme values and no systematic cost parameter adjustment scheme is robust however we find a systematic adjustment to the demand parameters that serves as a good approximation and is robust we therefore conclude that end of period cost accounting without parameter adjustments is in general inappropriate when costs are incurred continuously but there are adjustments that can make it work well

how many parts to make at once reprinted from factory the magazine of management volume 10 number 2 february 1913 pp 135 136 152 interest on capital tied up in wages material and overhead sets a maximum limit to the quantity of parts which can be profitably manufactured at one time set up costs on the job fix the minimum experience has shown one manager a way to determine the economical size of lots

super size me product size as a signal of status this research proposes that consumers preference for supersized food and drinks may have roots in the status signaling value of larger options an initial experiment found that consumers view larger sized options within a set as having greater status because low power consumers desire status we manipulated power to test our core propositions whether induced in the lab or in the field states of powerlessness led individuals to disproportionately choose larger food options from an assortment furthermore this preference for larger sized options was enhanced when consumption was public reversed when the size to status relationship was negative i e smaller was equated with greater status and mediated by consumers need for status this research demonstrates that choosing a product on the basis of its relative size allows consumers to signal status illustrates the consequences of such a choice for consumers food consumption and highlights the central role of a product category s size to status r

the discrete time eoq model solution and implications abstract consideration is given to the classical eoq with backorders model where one of its original assumptions is modified instead of being continuous time forms a sequence of indivisible quanta unit periods the implications of this assumption common in the analysis of periodic review policies are explored for deterministic demand modeled as an inventory system under the s t policy long run average cost is derived and it is shown that optimal control involves the solution of a two dimensional non convex integer optimization problem properties are established leading to a solution algorithm which guarantees optimal s and t determination with at most three cost function evaluations it is shown that contrary to intuition the classical eoq optimal cost is not a lower bound for the system studied this is exploited to develop distribution free lower bounds for stochastic periodic review systems together with properties rendering them useful in inventory optimization

household choices in equilibrium this paper is an empirical investigation of equilibrium restrictions on household consumption and male labor supply it exploits a simple factor structure rationalized by two assumptions that household allocations are pareto optimal and that the labor market is competitive the paper estimates household preferences and tests how well this parsimonious factor structure represents panel data on married couples and time series data on asset returns most of the estimates are roughly comparable to those found in previous work no evidence against the simple factor representation is found and the intertemporal capital asset pricing model is not rejected copyright 1990 by the econometric society

testing for excess sensitivity in consumption a state space unobserved components approach this paper tests the joint rational expectations permanent income hypothesis using a state space unobserved components model to specify anticipated and unanticipated elements of permanent transitory and seasonal components of the income path and measure their relationships with consumption the results do not find significant excess sensitivity however a similar test that accounts for seasonality using x 11 adjusted data does thus indicating that seasonal filtering may be responsible for previous empirical rejections of the theory since the model includes consumption information in estimating the different components of income it also improves upon univariate investigations of the relative magnitudes of permanent and transitory disturbances to the income path

the permanent income hypothesis and consumption durability analysis based on japanese panel data the permanent income hypothesis with durability of commodities is tested on a panel of about 2 000 japanese households for several commodity groups under static expectations about real interest rates and for some class of utility functions consumption which is a distributed lag function of current and past expenditure follows a martingale main empirical results are i the durability of commodities usually classified as services is substantial ii the hypothesis applies to about 85 percent of the population consisting of wage earners and iii income changes explain only a small fraction of the movements in expenditure

desire to acquire powerlessness and compensatory consumption three experiments examine how power affects consumers spending propensities by integrating literatures suggesting that a powerlessness is aversive b status is one basis of power and c products can signal status the authors argue that low power fosters a desire to acquire products associated with status to compensate for lacking power supporting this compensatory hypothesis results show that low power increased consumers willingness to pay for auction items and consumers reservation prices in negotiations but only when products were status related the link between powerlessness and compensatory consumption has broad implications both for consumers health and well being and for understanding the psychological state of power

consumption and capital market imperfections an international comparison the excess sensitivity of consumption to current income fluctuations is higher in countries where consumers borrow less low levels of consumer debt can result either from capital market imperfections or from a low demand for loans the evidence suggests that the former view is more appropriate than the latter and thus supports the hypothesis that excess sensitivity may be attributed to liquidity constraints rather than to other factors copyright 1989 by american economic association

powering sustainable consumption the roles of green consumption values and power distance belief as human consumption is one of the key contributors to environmental problems it is increasingly urgent to promote sustainable consumption drawing on the agentic communal model of power this research explores how the psychological feeling of power influences consumers preference for green products we show that low power increases consumers preference for green vs conventional products compared to high power studies 1a and 1b importantly we identify two factors moderating the main effect of power on green consumption specifically we find that the effect of power on green consumption is more salient among those with high green consumption values study 2 in addition the effects of power are dynamic as a function of power distance belief pdb such that low power vs high power promotes green consumption in the low pdb context while high power vs low power promotes green consumption in the high pdb context study 3 taken together these findings provide novel insights into understanding green consumption from the perspectives of social power green values and pdb besides contributing to the literature the findings have significant implications for marketers and policy makers in promoting green campaigns bridging the attitude behavior gap and building a more sustainable society