Consumer behaviour impacting public policy
Supported by EU funding, the CONSBEHAVIOR project focused on consumer behaviour and market equilibrium in industrial organisation. To achieve its goals, research covered price dispersion and search costs, and dynamic demand with inventories. Work was also carried out on product safety and consumer reactions to product safety threats, as well as gender bias in household expenditure patterns.Findings on the relevance of search costs and its effect on the purchase behaviour of consumers were addressed in the paper 'Price Dispersion and Search Costs: The Roles of Imperfect Information and Product Differentiation'. This paper is the first to identify search costs in a context of horizontally differentiated products (where product attributes are valued differently by each consumer). Research and findings on dynamic demand have been outlined in the paper 'Inventories, Unobservable Heterogeneity and Long Run Price Elasticities'. The paper develops a dynamic model of demand with inventories, and offers a simplified estimation method for structural long-run price elasticities that are consumer specific.With respect to product safety, the main objective was to investigate how consumers react to a major product safety threat such as the mad cow disease crisis. A relevant paper, 'Consumers. Response to Product Safety Threats: Evidence from the Mad Cow Disease', is being prepared. Among other contributions, this line of investigation advances a framework for assessing the effects of price controls and other regulatory measures on consumer choice and expenditure. Gender differences in household expenditure patterns are examined in the paper 'Gender Bias in Intrahousehold Allocation: Evidence from an Unintentional Experiment'. Results from this study were published in the Review of Economics and Statistics.The study was successful in highlighting issues relevant to public policy, particularly with regard to competition. CONSBEHAVIOR outcomes thus contribute to the literature on parameters related to market functioning and therefore policy implications.
Keywords
Consumer behaviour, market equilibrium, industrial organisation, price dispersion, product safety, competition environment, public policy
