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LET THE IGNORANT CONSUMER BEWARE: CONSUMER INFORMATION AND EFFICIENCY OF CONSUMER DECISION MAKING IN THE USA
Abstract
Although many of the institutions which make up the modern economy pour out data which they hope will be used by consumers in their decision on what to consume, consumers still are regarded by some commentators as ‘ignorant’ when they make those decisions. Two main reasons are postulated, involving the cost of search and requirements for efficient data management. The policy implications are then assessed and the need for leadership in consumer information policy expressed. Finally, the way higher education can help fill the policy gap is briefly explored.
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NOTES AND REFERENCES
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It has been assumed implicitly in what follows that the consumer recognises a need to be informed. Lichtenstein refers to this as a self-awareness assumption and states that “… there must [nonetheless] be some self-awareness among consumers. Otherwise there would be no motivation to engage in information acquisition activities at all. Hence, to assert that information acquisition will occur — as it indeed does — is to also assert that at least some minimum amount of self-awareness exists.” (P.M. Lichtenstein, ‘A taxonomical approach to consumer ignorance and informational policy’, Journal of Behavioural Economics, 1977, p. 143).
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B. T. Ratchford, ‘Cost benefit models for explaining consumer choice and information seeking behaviour,’ Management Science, 17, 1980, pp. 14–25. This treatment of search does not make explicit the possibility of limits to the ability of consumers to handle information, and the related concepts of bounded rationality (see H. A. Simon, Models of Man, John Wiley, New York, 1957), complexity (see O. E. Williamson, Markets and Hierarchies: Analysis and Antitrust Implications, Free Press, New York, 1975), and information overload (see W. Wilkie, ‘Analysis of the effects of information load’, Journal of Marketing Research, 11, November 1974, pp. 462–6). In the crude cost-benefit framework, these could be treated by truncating the marginal benefit function at the appropriate point.
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Beales et al., op. cit., p. 506.
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For a discussion of this point, see Schuman, op. cit.
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There is a distinction here between data supplied for immediate profit through increased sales (such as block newspaper advertisements touting grocery store ‘specials’) and those supplied to augment longer-term profits through increasing consumer confidence in the business system (such as leaflets on product safety or ‘buying tips’). The latter, while they may earn immediate profit for the organisation which physically produces the material, do not set out with the express purpose of persuading a consumer to buy product × at terms Y, and do not, therefore, embody the potential of moving a consumer away from the perfect information frontier.
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SOCAP Guidelines to Business-Sponsored Educational Materials, brochure available from National SOCAP Office, 4900 Leesburg Pike, Alexandria VA 22302, USA.
Quoted in Schuman, op. cit., p. 1062.
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See Schoenfeld, op. cit. Even at the high school level, the heyday of consumer education may well be past, though Schoenfeld notes a revival in some states.
G.J. Duncan and J.N. Morgan (eds), Five Thousand American Families — Patterns of Progress: Volume X, Analyses of the First Thirteen Years of the Panel Study of Income Dynamics, Survey Research Center, Institute for Social Research, University of Michigan, 1983.
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D.A. McGowan, Consumer Economics, Allyn and Bacon, Boston, 1984, p. 16. McGowan defines consumerism as “a social movement to inform and advocate for consumers” (p.3).
The professional arm of consumer economics is the American Council of Consumer Interests, whose organ, the Journal of Consumer Affairs, has become one of the main repositories of written contributions to the discipline. A content analysis of the journal over the last decade shows that 7 per cent of the articles published over that period were on information acquisition, 12 per cent were on decision making, 7.5 per cent on consumer education, and 6 per cent on product quality. Policy analyses and market structure, which incorporate consumer information issues, together made up almost half (45 per cent) of articles published (L.V. Geistfeld and R. Key, ‘A decade in perspective 1975-84: focus and trends in the journal of consumer affairs’, Journal of Consumer Affairs, 20, 1, Summer 1986, pp. 65–76).
Edmondson M. E., Flashman R. H. and Forgue R. E.. 1986. . ‘Preliminary analysis of the effectiveness of newsletters to educate consumers’. In: . Proceedings of the 15th Annual Conference for the Southeastern Regional Association Family Economics/Home Management; . February. 1986 ; , Akron , Ohio . . pp.p. 45––6. .
E.R. Forgue, M.A. Paynter and R.H. Flashman, The Kentucky consumer hotline: an example of government-university co-operation’ in Consumer Services for the Family, Proceedings of the 27th Annual Conference, American Council on Consumer Interests, Minneapolis, Minnesota, April 1981, pp. 35–8.
W. C. Moser, BSU/BBB: Unique in the Nation, Department of Marketing, Ball State University, Muncie, Indiana, n.d.
F.G. Lawrence, C.G. Carter, K.S. Behm and M.B. Dawes, ‘Consumers interest in telephone service information’ in Consumer Services for the Family, op. cit., pp. 70–4.
R. Widdows, Purdue Consumer: Summary, Consumer Sciences and Retailing Department, Purdue University, W. Lafayette, Indiana, 1986 (available on request from author).
S. Margolius, ‘The consumer's real needs’, Journal of Consumer Affairs, 9, 2, 1975, pp. 129–38. Quoted in Aaker and Day, op. cit., p. 54.
The initiatives mentioned here are still a long way removed from the ‘initiatory democracy’ which Ralph Nader advocated as the means by which higher education institutions would reach the consuming public (R. Nader and D. Ross, Actions for a Change, Grossman, New York, 1971). Nader‘s idea was for students to become resources for consumers through volunteer organisations known as Public Interest Research Groups. Among the activities recommended for PIRGs was the Consumer Center, a telephone service which would provide information to consumers on request. Several PIRGs were set up following Nader's promotion of the idea and a few remain in operation today.
Quoted in Aaker and Day, op. cit., p. 48.