A new paradigm: the wealth effect of the stock market on consumption,in a context of interacting bio-systems

This study examines the existence of a stock market wealth effect on aggregate private consumption in the economy. A theory of investor/consumer behavior is suggested, in a context of a symbiotic relationship between two quasi-bio-systems. The model offers predictions about likely outcomes in capital market interaction with the underlying economy in general and consumption in particular. These predictions are validated empirically. Specifically, the paper finds that investors/consumers do not respond immediately to a stock market rise (fall). Rather, they wait at first and thereafter gradually accelerate their ‘wealth spending’ on consumption only after they are convinced that the gain is permanent (a variation of the ‘income smoothing’ that was suggested many years ago by Friedman (1957)). The paper suggests that the capital markets and the economy interact like two bio-systems symbiotically responding to each other. This study presents evidence that the consumption wealth spending peaks at approximately 2.5% of the stock market wealth CUMULATIVE gain in the previous 12–24-month period, with some effects lingering on up to 36 months. For example, it shows that over 40% of the growth in consumer spending in 1999 was attributable to gains in the stock market in previous years, contributing to a strong GDP in that year.     

Climbing out of an economic crisis: A cycle of consumer sentiment and personal stress

This research examines bidirectional relationships between consumer sentiment and personal stress. It seeks to answer the question whether reduced consumer sentiment (consumer perceptions about the global, national and personal economic situation) raises personal stress levels, and whether increased personal stress levels depresses consumer sentiment. Finding such relationships would reveal a pathway from economic to personal well-being, as reflected in personal stress, and the other way around. A large longitudinal study in the Netherlands with a total of eight waves across three years (2012–2014), 4 waves during and 4 waves after the recent worldwide economic crisis, finds on average low personal stress levels among consumers, which is reassuring. Also and as expected, consumers are more positive about the state of the economy after than during the crisis. Importantly, more positive consumer sentiment indeed contributes to lower levels of personal stress. Moreover, the more personal stress consumers experience, the more pessimistic they are about the state of the economy after the crisis, whereas this connection is weaker during the crisis. This sheds new light on the pathways between consumer sentiment about the economy and their personal well-being.     

A note on the measurement,quantification, and use of consumer confidence

It is argued that consumer spending on durable items is not necessarily the only type of consumer spending to be influenced by consumer confidence but. given a certain degree of affluence. spending on non-durables can also be influenced by it.Different methods of quantification of consumer confidence are touched upon and the issue of equal weighting versus differential weighting, where weights are ascertained by the use of factor analysis, is discussed in more detail. Various indices of consumer confidence are computed and tested by means of regression analyses. It was found that it is immaterial whether a composite measure of confidence is based on factor analysis or simply on the summing and averaging of responses.The results of the regression analyses suggest that the hypothesis that consumer sentiment partly determines movements in private consumption expenditure holds true, especially in the case of durables. There are indications, however, that spending on non-durable goods might also be influenced by consumer sentiment.     

ENVIRONMENTALISM,STIMULUS, AND INEQUALITY REDUCTION THROUGH INDUSTRIAL POLICY: DID CASH FOR CLUNKERS ACHIEVE THE TRIFECTA?

The 2009 American Cash for Clunkers program, which subsidized consumers who scrapped old vehicles and purchased new vehicles, was promoted by appealing to multiple constituencies. We evaluate the policy and alternatives according to its stated goals: emissions reductions, economic stimulus, and reducing inequality. We calibrate a dynamic partial equilibrium portfolio model to match consumer expenditure data from 1998 to 2011 focusing on heterogeneity across cars and trucks. We find the program generated $0.17 in environmental benefits, $0.28 in consumer surplus, and $0.31 in net discounted additional spending per subsidy dollar. Since subsidies largely went to middle-income infra-marginal consumers, the program exacerbated consumption inequality. We evaluate alternative policy designs and find no policy which simultaneously improves all outcomes. (JEL H23, L52, L92, D63)     

Getting Real About Food Prices

The 2008 spike in world grain prices is widely recognised to have had serious impacts on food security and poverty, but these high grain prices are commonly described as low in historical terms – an inconsistency resulting from the use of advanced‐ and global‐economy price indices in calculating real prices. This ignores the high share of food in poor people's expenditures and the indirect effects of income growth on expenditure patterns of rich consumers. Poor consumers have not experienced the same falls in real food prices and are more vulnerable to price shocks. Different price indices must be developed to take account of differences between consumer groups.     

Shopping with companions: Images,influences and interpersonal dilemmas

Although much neglected in discussions of consumer behavior, a good deal of people's shopping activity is conducted in groups. Derived from a larger study of consumer behavior which uses open-ended interviews with ninety-five shoppers as the primary base, this paper considers the ways in which people view and deal with shopping companions. While consumers are typically envisioned to be skeptical of the vendors they encounter in their shopping ventures, many are also wary of the abilities of their companions to influence their purchasing decisions and shape their spending practices. Thus, shopping companions may be appreciated in several respects, but they generate a number of interactional dilemmas for consumers. In addition to balancing the usual ambiguities the marketplace represents, shoppers find themselves juggling additional definitions (encouragements, discouragements, distractions) of products, money, and users, as well as their concerns with the identities and ensuing relationships implied by the presence of their companions. Consequently, given the generally higher levels of trust attributed to them by shoppers, companions may represent no less significant forces with which to contend than the normally (somewhat distrusted) salespeople shoppers encounter. Shoppers' concerns about maintaining self direction are especially prominent in the analysis, but this thrust is qualified by task vs. recreational approaches to shopping as well as shoppers' perceptions of companion assistance and influence. Shedding light on people's concerns with avoiding, assessing, and neutralizing companions, this paper adds to our more general understanding of dyadic and triadic relations.     

CONSUMER CONFIDENCE AND ECONOMIC FLUCTUATIONS

If consumers become pessimistic about the state of the economy, can there be a slowdown in output, even if their pessimism is not based on economic fundamentals? Recent macroeconomic models show the answer is yes, if there are “strategic complementarities” and multiple equilibria. We investigate the link between consumer confidence and economic fluctuations using vector autoregressions. In all models, after controlling for economic fundamentals, the hypothesis that consumer sentiment does not cause GNP (in the Granger sense) can be rejected. Variance decompositions suggest that consumer sentiment accounts for between 13 and 26 percent of the innovation variance of GNP.     

Implementing the family preservation program: Feedback from focus groups with consumers and providers of services

There is a growing understanding that preventative child welfare efforts can be both more cost effective and are more desirable philosophically than strictly remedial programs. The Family Preservation Act provides funds to assist communities in strengthening and preserving at-risk families. In order to implement this program effectively, local communities must design new programs and procedures which will be both attractive to consumers and effective in meeting their needs. This study it identifies problems with contemporary child and family services and suggests solutions to those problems. This study uses a focus group format and presents ideas generated by those individuals who will be most directly affected by this legislation; front line service providers and service consumers. Several areas of weakness in the current service delivery system are identified, including bureaucratic barriers, limited resources, problematic consumer/provider relations and a range of collaborative issues, both within and between agencies and the communities they serve.     

THE BEHAVIOR OF REGULATORY ACTIVITY OVER THE BUSINESS CYCLE: AN EMPIRICAL TEST

This paper tests a prediction of the interest-group theory of regulation which suggests that regulators generally will not force any one group to bear the full adjustment costs associated with variations in the business cycle. That is, the interest-group model predicts that regulatory agencies will redistribute cyclical gains and losses by supplying more "producer protection" regulation during contractions and more "consumer protection" regulation during expansions; i.e., regulatory activity which reduces consumer welfare will tend to be countercyclical, intensifying when aggregate demand falls and abating as demand increases.
The empirical results show a countercyclical and statistically significant ceteris paribus relationship between Federal Trade Commission enforcement efforts under the Robinson-Patman Act and several alternative measures of general business conditions. Since the Robinson-Patman Act is viewed widely as anti-consumer, the findings suggest that in cyclical downturns the Commission moves to protect producers against losses by bringing more cases which limit the tendency for prices to fall. This result may be rationalized under the view that during recessions, the Federal Trade Commission is in the business of transferring wealth from consumers either to protect small business or to bolster cartels. On the other hand, during business expansions the Commission reduces its Robinson-Patman case load, and such a change in enforcement may serve to mitigate producer gains, transferring wealth to consumers at the margin. In any case the paper offers empirical support for the interest-group model by providing evidence that the business cycle plays an important part in explaining the level and pattern of regulatory activity.     

Consumer activism in the Czech Republic: the role of exit and voice in a changing economy

The question “Are consumers actively pursuing their market responsibilities in transforming economies?” is at the center of this article. It reports on a study of Czech consumers using Hirschman's “exit/voice” theory. The research focuses on what actions consumers, who had never experienced the freedom to express complaints, would take when confronted with market disappointments and failures. Analysis of a randomized cross section of consumers indicates that they acknowledge their responsibility to the market by going beyond the choice stage of consumption and actively giving voice to their concerns to retailers and manufacturers. This evidence represents the first milestone describing consumer voice behavior in a transforming economy.     

IS THE BUDGET DEFICIT “TOO LARGE?”

Yes. Specifically, we find that recent spending and taxing policies of the government–if continued–violate the government's intertemporal budget constraint. As a result, government spending must be reduced and/or tax revenues must be increased. These conclusions are based on tests of whether government spending and revenue are cointegrated. In addition to examining real spending and revenue, we also normalize these variables by real GNP and population. For a growing economy, these normalized measures are perhaps more pertinent. We also test and find support for the hypothesis that deficits have become a problem only in recent years.     

Differences in Factors Attracting Consumers to Taiwan's Supermarkets and Traditional Wet Markets

Exit interviews were used to summarize factors attracting consumers to six supermarkets and three wet markets in a representative city. Using the history of the marketplace as the foundation for analysis, the strengths and weaknesses of the two retail formats are introduced and are compared to the consumer response data. Findings indicate that the decline of Taiwan's traditional markets will probably continue until all are replaced by new retail formats. Currently, the traditional market is in the weakest of all the retail positions since it supplies the needs of a shrinking population of older consumers with preferences and shopping behaviors unlike those of younger, nontraditional consumers. Supermarket expansion is slowing because new hypermarkets, convenience stores, and warehouse stores are competing to satisfy the needs of the younger, more mobile target population. Overall, store formats that provide lower prices, sales promotions, a good environment, good product quality, and good service have the greatest opportunity to build consumer loyalty and increase market share.     

Measuring consumer perceptions of payment mode

Although existing scales assess perceptions of money per se, none capture the mental and emotional experiences that the corporal quality of the payment mode generates. Historical and sensory associations with payment modes generate differential cognitive and emotional sensitivity in mental accounts, and influence the type, value and amount of products purchased. Although an increasing amount of attention has been devoted to the influence of payment mode on spending behavior, and little effort has been devoted to developing an appropriate measurement scale to capture consumers’ cognitive and emotional associations with payment modes. To address this gap in the literature, this study developed a conceptual and empirical framework with a sample of approximately 800 participants, and shows how the constructs and the scales capture perceptions of payment modes. The 19-item PPM scale represents four dimensions: emotions relating to cash and card based payment modes, social and personal gratification and money management. The PPM measurement scale demonstrates acceptable reliability and shows that consumer perceptions of payment modes influence spending behavior and predict ownership of financial cards in possession. The scale is useful in understanding consumer cognitive and emotional associations with payment modes, particularly the use of “owned money” and how these associations impact on payment mode choice.     

Research on Consumer Well-Being in Malaysia

This research note provides an overview of consumer well-being research in Malaysia, and highlights a major research study on consumer well-being by Masud et al. (2010). Masud et al.??s data indicate that Malaysian consumers enjoyed their rights as consumers, held some level of acceptable consumer values, possessed reasonable levels of knowledge, and practiced good consumer principles. Nevertheless, some consumers indicated a low level of overall well-being. The data also revealed the need for strong support from government and market sectors to enhance the well-being of consumers in Malaysia. More studies on consumer well-being in Malaysia are suggested and universities and research institutes are urged to intensify their efforts to convince policy makers and grant providers to appropriate funds for research on consumer well-being in Malaysia.     

Interaction Ritual Chains and the Mobilization of Conscientious Consumers

Markets for “socially responsible” products are comprised of activists who lead protests, organize boycotts, and promote the consumption of these goods. However, the ultimate success of these movements is dependent upon the support of a large number of consumers whose self-professed values often contradict with their own purchasing patterns. Consumer support of socially responsible products cannot be explained by consumer culture theories, which privilege identity, attitudes, and behavior, or mass consumption theories, which emphasize location and advertising’s influence on consumption patterns. These perspectives are informative but unable to explain why some consumers will only buy socially responsible products while others with similar value systems possess much more contradictory consumption patterns. I extend Collin’s theory of “Interaction Ritual chains” to show that rituals and emotions—more than identity or coercive advertising—explain how ethical consumers are mobilized. I show how face-to-face interactions between consumers and producers produce solidarity and motivate support for the Fair Trade movement. This paper employs a micro-sociological approach to contribute to studies of ethical consumption in three notable ways: 1) it emphasizes the importance of “contexts” and is able to explain contradictions in consumer behavior; 2), it contributes to our understanding of “brand communities” by describing the micro-sociological processes that both help to build these communities and create value within the products that organize these groups; and 3) it offers the potential to develop a predictive model for the purchasing patterns of consumers.     

Implications of ERISA for health benefits and the number of self-funded ERISA plans

This Issue Brief provides an overview of the issues relating to the Employee Retirement Income Security Act of 1974 (ERISA) and health benefit plans, the major case law relating to ERISA and health plans, and the implications of the preemption of state regulations for health plan sponsors and participants. It also presents the latest data on the number of health plan participants in self-funded ERISA plans. Finally, it presents a summary of current legislative proposals that would attempt to amend ERISA. Under the framework ERISA established for employee benefit plans, the regulation of employment-based health benefit plans has evolved into a two-tiered system in which both federal and state laws play important roles. The Supreme Court has interpreted ERISA's "savings" and "deemer" clauses to mean that insured plans are subject to regulations directly at the federal level and indirectly at the state level, while self-funded plans are regulated exclusively at the federal level. The ERISA statute and the courts' interpretations of the Act have created a sharp controversy over how employee health benefit plans are provided and administered, with state regulators and consumer advocates on one side of the debate and plan sponsors (e.g., employers and unions) on the other. State regulators and consumer advocates tend to favor more regulation, and in many instances greater regulation at the state level, which they argue would provide more protections for consumers. However, employers and unions (or any plan sponsors) think ERISA preemption is very important to their ability to provide innovative and cost-effective health benefits for their employees, and assert that ERISA's present structure should be preserved. The U.S. General Accounting Office (GAO) found that 44 million individuals (39 percent of those in ERISA plans) were enrolled in self-funded ERISA plans in 1993, up from 39 million (33 percent of those in ERISA plans) in 1989. The Employee Benefit Research Institute (EBRI), using the same methodology as GAO with 1995 data, estimated that 48 million individuals (39 percent of those in ERISA plans) were enrolled in self-funded ERISA plans in 1995. When policymakers look to amend ERISA, they should consider whether the change to ERISA will produce a higher level of quality for consumers than is being provided under the present system and will continue to do so in the future. Policymakers must also decide whether quality of care is better enhanced by health plans' greater exposure to liability or by market forces. If policymakers decide that increased exposure to liability is the route to go, will consumers be able to enjoy any potential improvement in quality or will more individuals end up uninsured because of increased costs and not be able to get any care regardless of the quality?     

It’s about the process,not the result: An fMRI approach to explore the encoding of explicit and implicit price information

This research examines the neurophysiological correlates of consumers’ price memory processes. We focus on the explicit and implicit dimensions of consumers’ price knowledge and use an experimental functional Magnetic Resonance Imaging (fMRI) study to assess how the encoding of task-dependent price memory affects the choice process and neural activation. The findings of our study add to the field of consumer neuroscience by demonstrating how neural correlates of explicit and implicit task-dependent price memory can shed light on processes that guide consumer decision-making. Over the course of our experiment we found that consumers did not always make consistent decisions, but that their decisions were influenced by explicit components of price memory. Implicit price memory components seem to have a more supportive role in the decision-making process. In summary, we found that price memory is a dynamic construct that is influenced by unconscious and neurophysiological processes, and we conclude that a neurophysiological perspective can add value for consumer and marketing research.     

STATISTICAL MODELS OF CONSUMER BEHAVIOR WITH HETEROGENEOUS VALUES AND CONSTRAINTS

In a market with heterogeneous individuals, the fact that a particular group of individuals are the consumers of a particular product already indicates that there exist systematic differences between them and the average person. Simple tools from statistical theory are used here to analyze the implications of consumer diversity. It is argued that an increase in consumer diversity will increase the gains from trade, and that there is a "shadow price of heterogeneity" associated with product quality. Throughout the discussion, the significance of consumer self-selection and the distinction between "average" and "marginal" will be emphasized.     

Manufacturer suggested retail prices,loss aversion and competition

We study a model of vertical relations with imperfect retail competition in which a fraction of the consumers display reference-dependent demand with respect to the manufacturer’s suggested retail price. We demonstrate that in equilibrium the suggestion will either be undercut or complied with by the retailers, but never surpassed: undercutting occurs if competition is fierce, the impact from consumers affected by reference-dependent preferences is significant, and high price suggestions are credible; compliance occurs otherwise. We provide comparisons, and discuss implications, for consumer surplus for the scenarios with suggested retail prices, without vertical restraints and with resale price maintenance.     

The compelling urge to misbehave: Do impulse purchases instigate unethical consumer behavior?

The present research explores the relationship between impulse buying and unethical consumer behavior. This work is based on the surprising results of an unrelated study, during which we observed that participants shopping for impulse products were more likely to cheat to obtain a more expensive product than participants shopping for regular products. Based on these findings and building on previous research on the relationship between impulsiveness and delinquency, three studies were set up to test the impact of impulse buying on different forms of unethical consumer behavior. The results confirmed that consumers making an impulse purchase were more likely to behave unethically than consumers making a regular purchase. These findings illustrate there is a dark side to impulse buying for retailers.