Recursos

A direct examination of consumer behaviour and revealed preference was undertaken in two controlled experiments by Sippel (1997). These experiments, involving a total of 42 university students, improved upon prior time-series studies which relied upon surveys of household weekly expenditure on consumption goods (Koo, 1963; Mossin, 1972). Such studies found inconsistent behaviour in terms of consumption patterns, although the

significance of these findings is open to question as such outcomes could simply be the result of changing tastes over time. In contrast, Sippel’s experiments tested choice behaviour at a single point in time, thereby eliminating the problem of potentially changing tastes. In

addition, participants were tested in terms of their individual preferences, thus eliminating any group effects, with decisions observed and recorded, hence avoiding potential data bias as a result of inaccurate reporting.

Participants were presented with a list of 8 consumer goods, comprising various food and drink items as well as other goods of a recreational nature (magazines, video clips and a computer game). The goods were selected so as to appeal to a wide range of tastes but also to enable as fine a division of available notional income as possible, thereby enabling clear and precise preferences to be expressed in terms of quantities chosen. The non-food and drink items had time-related levels of consumption associated with them. For example, the video clips and magazines had implied consumption times of between 30-60 minutes, while the computer game had a running time of between 27.5 and 60 minutes. Participants were able to divide their income freely meaning that they could purchase a fraction of a video clip, if they so desired.

In order to derive meaningful data on preferences and to analyse the internal consistency of choices made, 10 different schedules were presented to the participants. The same 8 items were used in each schedule but the prices of the items and applicable income constraints were varied substantially. All prices and incomes were expressed in terms of nominal monetary units, with prices unrelated to those found in actual retail environments. Participants were required to select their 10 preferred baskets conditional upon the relative prices presented and within their income constraints.

The first experiment, comprising 12 participants, was structured to test homogeneity of preference. The approach adopted was to make 2 of the 10 choice sets identical in terms of relative price structure across all items. The two sets differed, however, to the extent that all of the prices in the second set, as well as the income constraint, were 15% higher than in the first set. This replication was made less obvious by varying budget constraints across all 10 series and separating the similar sets in the presentation sequence. The expectation, based upon

rational behaviour, was that participants would be consistent in their choices across the two similar sets by declaring the same preferences in each, both in terms of items included and their relative weightings within their respective consumption baskets.

The specification of the first experiment had two income effects. The first resulted naturally from varying income constraints across the 10 series. The second, more subtle, income effect resulted from the changes in relative prices. Such an effect arises if, for

example, for any given fixed level of income, the price of one item falls while the prices of all other items are held constant. Since the consumer now requires less income to purchase the same quantity of items as before, the effect is equivalent to that of an actual increase in

income with no prices changing and is therefore termed an income effect. In order to eliminate this income effect, the second experiment, comprising 30 participants, was designed so that any changes in relative prices were completely offset by changes in the budget constraint. In order to then test homogeneity of preferences, the various series were presented to the

participants in such combinations that the basket selected in series one would be affordable in later series and so should again be selected if the decision making process is rational. As with the first experiment, relative prices were varied across choice sets ensuring that participants were unlikely to spot any obvious patterns in the data, which may then have resulted in strategic choices in later sets based upon prior expressions of preference.

Participants had unlimited time in the first part of the experiments during which they selected their preferred baskets. They could review and change selections as often as they wished, including returning to and modifying earlier baskets if required, the only exception being the first chosen basket in the second experiment which remained fixed as the reference point. In order to help the participants in their selection tasks, they were provided with

personal computers and software designed to aid their allocation process. Therefore,

participants could select the required quantities of any item from the screen and their basket would update automatically showing income allocated, based upon prices and quantities, and residual income to be allocated. Should budget constraints be violated, a warning message would appear. As a further aid, the programme also informed the subject how remaining income could be allocated to various items in order to use up all available funds. The computational aspects of the experiment were therefore made much easier and less time consuming for the participants and also eliminated the possibility of arithmetical error. Changes to baskets could be made with ease, ensuring that participants were able to allocate most of their time to deciding their preferences rather than being side-tracked in terms of performing calculations. Once each of the 10 selections had been finalised, the experimenter selected the actual basket to be presented to the subject at random. The subject was then taken to the laboratory and invited to consume his goods.

Sippel’s experiments provided a direct test of the practical feasibility of the axioms of expected utility as expressed through Samuelson’s concept of revealed preference. The tasks presented to the participants in the two experiments represented a typical decision-making scenario envisaged by expected utility theory. Obvious biases found in other experiments were largely eliminated, particularly in relation to time series impacts on taste shifts. In relation to the first experiment, 11 out of the 12 participants violated the axioms of rational choice selection, implying that just one subject could be considered a utility maximiser. Each of the other participants showed inconsistency with regard to their choices of bundles in identical situations. The only circumstance in which such an outcome might be consistent with classical rational behaviour would be in the case of indifference between the chosen bundles.

In the second experiment, 22 of the 30 participants were also found to violate the strong axioms of revealed preference.

The findings of the experiment directly contradict the assumptions of classical demand theory. Examination of the data found that participants were far from random in expressing their preferences, spending a considerable time engaging in the selection process. Each of the participants revealed strong preferences for certain goods over others, representing clear expressions of taste, such that some goods were not chosen at all even at low prices. In other cases, participants quite willingly substituted one good for another based upon changes in relative prices. On that basis, it is reasonable to assume that participants all selected the bundles they genuinely believed they preferred at that point in time. A number of participants made repeated changes to their chosen baskets before settling upon their final choices. Even when these prior choices were considered, before amendments were made, no improvements in overall consistency were found. Sippel thus concluded that, while all of the participants were clearly motivated by the experiment, the axioms of revealed preference were

nevertheless violated by the overwhelming majority.