Demand for Self Control: A model of Consumer Response to Programs and Products that Moderate Consumption

Berg, Nathan and Kim, Jeong-Yoo (2010): Demand for Self Control: A model of Consumer Response to Programs and Products that Moderate Consumption.

Abstract

Is it better to apply effort to increase personal consumption, or control what one wants? The model presented here provides a characterization of demand for self control, namely, its responsiveness to price and risk. Unlike most other models of self control, the model does not identify self control with time inconsistency or rely on the multiple-selves framework. Self control refers to resources allocated to preference transformation technology enabling consumers to moderate desire for ordinary consumption by reducing threshold levels required to achieve goals or target-levels of consumption. Consumers face a choice between allocating resources toward increasing expected levels of consumption or increasing chances of contentment through self control. Because of strong income effects, demand for self control turns out to be non-monotonic in price and sometimes discontinuous, revealing potential for unanticipated and sometimes surprisingly large responses to small changes in price. The model is used to analyze consumers’ willingness to follow new regulations, take up credit counseling, enroll in financial literacy programs, and purchase products aimed at improving financial decision making through cultivation of self control.

• Item Type: MPRA Paper
• Language: English
• Keywords: Preference Choice, Preference Change, Moderation, Restraint, Desire, Financial, Decision Making, Consumer Credit, Consumer Finance, Institutional Design, Ecological Rationality, Bounded Rationality, Behavioral Economics
• Subjects: D - Microeconomics > D1 - Household Behavior and Family Economics > D18 - Consumer Protection; D - Microeconomics > D1 - Household Behavior and Family Economics > D11 - Consumer Economics: Theory; B - History of Economic Thought, Methodology, and Heterodox Approaches > B3 - History of Economic Thought: Individuals > B30 - General; D - Microeconomics > D1 - Household Behavior and Family Economics > D13 - Household Production and Intrahousehold Allocation; D - Microeconomics > D0 - General > D03 - Behavioral Microeconomics: Underlying Principles; C - Mathematical and Quantitative Methods > C6 - Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C65 - Miscellaneous Mathematical Tools; B - History of Economic Thought, Methodology, and Heterodox Approaches > B5 - Current Heterodox Approaches > B52 - Institutional ; Evolutionary; G - Financial Economics > G2 - Financial Institutions and Services > G28 - Government Policy and Regulation; C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C21 - Cross-Sectional Models ; Spatial Models ; Treatment Effect Models ; Quantile Regressions; D - Microeconomics > D6 - Welfare Economics > D60 - General; G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages

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