Date of Award

6-2015

Document Type

Open Access

Degree Name

Bachelor of Arts

Department

Economics

First Advisor

Yufei Ren

Language

English

Keywords

goods, cycle, offered, participants, spending

Abstract

Annually, the average American spends thousands of dollars on goods and services, financing millions of jobs. Employees then continue this cycle, through spending their paycheck on goods and services thus continuing the cycle. It is this cycle that is at the forefront of the American economy, and thus of utmost importance to increase the profitability of businesses. In part, this can be accomplished through a greater understanding of consumer spending patterns. This study aims to help understand consumer behavior through looking at both loss leader pricing, and the endowment theory. This was done through an on-campus experiment that looked at the effects of good and bad deals in both the retail and labor markets. Participants were placed in one of eight conditions where the price of goods, length of survey given, and order of goods presented were varied. After being offered an initial good, participants would be asked to complete a survey, and were then offered a second good. I hypothesized that the participants randomly assigned to either the “good” labor or retail market condition were more likely to purchase the second good. The data showed that payment, the cost of the good, and order in which they were presented in was significant. Furthermore, our results show that the shopping momentum theory was not as strong as previously thought with the effect wearing off extremely quickly, such that any time between items being offered made the effect of buying the first good obsolete. This has important implications for many business decisions.

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