On Social Aspects of Consumer Behavior - Comment

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American Journal of Economics and Sociology


The article focuses on social aspects of consumer behavior. In one of his articles, researcher Betty J. Collier presents an interesting argument that market failure may sometimes arise for sociological reasons. First, Collier argues that because lower-income individuals are relatively more likely to suffer from a lack of information or knowledge than higher-income individuals, this leads to inequality in the marginal rates of substitution of consumers. Second, Collier argues that lower-income consumers are more likely to act according to passive preference functions determined by cultural factors rather than according to an active preference function, which is income-related and price-related. This results in market failure, it is argued, because "The market ceases to register the consent or lack of consent of such consumers in the processes of product transformation." On the first point, regarding inequality of marginal rates of substitution, Collier is correct but her point is hardly news to economists. Many elementary economics texts include a discussion concerning "lack of information" or "consumer ignorance" as a form of market failure along with externalities, monopolies and so on.



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