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Misperception of Consumption: Evidence from a Choice Experiment

Author

Listed:
  • Seeun Jung
  • Yasuhiro Nakamoto,
  • Masayuki Sato
  • Katsunori Yamada

    () (Université de Cergy-Pontoise, THEMA)

Abstract

We investigate people's di erent conceptions of the economic term consump- tion when comparing with others. An Internet-based hypothetical discrete choice experiment was conducted with Japanese participants. As in other relative income comparison studies, we found that own consumption and own saving had a positive impact on utility, whereas the consumption and saving of a reference person had a negative impact on utility. However, the results show that the magnitudes of consumption and saving di er in size; saving could a ect utility much more than consumption for the Japanese subjects. By using scope tests, we found that the impact of own consumption is not monotonic and so does not necessarily increase utility. This calls into question the conventional assumption of the monotonicity of \the utility of consumption"; consumption could be perceived as a negative good. Our results, therefore, provide some evidence that, in reality, people understand and perceive the economic terms di erently from what economists would expect. Furthermore, when considering the consumption of others as well as their own, the size of the discrepancy is even bigger.

Suggested Citation

  • Seeun Jung & Yasuhiro Nakamoto, & Masayuki Sato & Katsunori Yamada, 2014. "Misperception of Consumption: Evidence from a Choice Experiment," THEMA Working Papers 2014-23, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  • Handle: RePEc:ema:worpap:2014-23
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    References listed on IDEAS

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    More about this item

    Keywords

    Relative Utility; Choice Experiment; Misperception of Economic Terms;

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • A13 - General Economics and Teaching - - General Economics - - - Relation of Economics to Social Values
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • J17 - Labor and Demographic Economics - - Demographic Economics - - - Value of Life; Foregone Income

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