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Does Consumer Irrationality Trump Consumer Sovereignty?

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Author Info

  • Joel Waldfogel

    (The Wharton School, University of Pennsylvania, and NBER)

Abstract

Scholars working on the border of economics and psychology have documented many contexts in which individual decision-making is unreliable and might be improved by paternalistic interventions. Against this mounting body of negative evidence, economists' default belief in consumer sovereignty has been motivated primarily by theory rather than evidence. The goal of the present study is to see whether there is direct evidence supporting economists' faith in consumer sovereignty in a simple context. We address this question by presenting direct evidence that consumers' own purchases generate between 10% and 18% more value, per dollar spent, than items received as gifts. © 2005 President and Fellows of Harvard College and the Massachusetts Institute of Technology.

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File URL: http://www.mitpressjournals.org/doi/pdf/10.1162/003465305775098107
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Bibliographic Info

Article provided by MIT Press in its journal Review of Economics and Statistics.

Volume (Year): 87 (2005)
Issue (Month): 4 (November)
Pages: 691-696

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Handle: RePEc:tpr:restat:v:87:y:2005:i:4:p:691-696

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Cited by:
  1. Emek Basker, 2004. "'Twas Four Weeks before Christmas: Retail Sales and the Length of the Christmas Shopping Season," Working Papers 0414, Department of Economics, University of Missouri, revised 20 Oct 2004.
  2. Principe, Kristine E. & Eisenhauer, Joseph G., 2009. "Gift-giving and deadweight loss," The Journal of Socio-Economics, Elsevier, vol. 38(2), pages 215-220, March.
  3. Sumit Agarwal & Souphala Chomsisengphet & Chunlin Liu & Nicholas S. Souleles, 2006. "Do consumers choose the right credit contracts?," Working Paper Series WP-06-11, Federal Reserve Bank of Chicago.
  4. Kaplan, Todd R. & Ruffle, Bradley J., 2009. "In search of welfare-improving gifts," European Economic Review, Elsevier, vol. 53(4), pages 445-460, May.
  5. Christian Schubert & Andreas Chai, 2012. "Sustainable Consumption and Consumer Sovereignty," Papers on Economics and Evolution 2012-14, Max Planck Institute of Economics, Evolutionary Economics Group.
  6. Rubén Hernández-Murillo & Rajdeep Sengupta, 2011. "The effect of neighborhood contagion on mortgage selection," Working Papers 2011-036, Federal Reserve Bank of St. Louis.

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