Budget Shoppers¿ Spending Biases

K. van Ittersum, J.M.E. Pennings, B. Wansink

Research output: Chapter in Book/Report/Conference proceedingAbstractAcademic

Abstract

Budget Shoppers¿ Spending Biases Koert Van Ittersum, Georgia Tech, USA* Joost M.E. Pennings, Maastricht University Brian Wansink, Cornell University, USA With one in seven American households living in poverty and another one in six only being able to afford basic necessities, nearly one in three U.S. households has to carefully plan its budgets and spend accordingly. Budget shoppers who exceed their budget may end up in financial distress, as they may be unable to pay recurrent expenditures, such as the monthly mortgage and insurance payments. It is therefore important to gain a better understanding of the spending behavior of budget shoppers. Budgeting––which we define as earmarking portions of income for specific uses––is common in many households and especially prevalent in lower income households (Bénabou and Tirole 2004). In both marketing and economics fields, descriptions of budget allocations and spending behavior tend to rely on a budget constraint utility model, in which consumers maximize their utility within their budget constraints (Hymans and Shapiro 1976; Kunreuther 1973). To maximize their utility given their budget, shoppers should spend their entire budget; spending more or less than their budget reduces their utility (Ariely et al., 2005; Rosen, 1974). Given that neither over- nor underspending is optimal, the question arises as to how budget shoppers cope? Do they spend their entire budget? Are they more likely to overspend or underspend relative to their budget? What drives these potential spending biases and how may they be eliminated? Gaining an understanding into these questions may help improve the welfare of budget shoppers as well as retail performance. To gain a first understanding about whether budget shoppers spend their entire budget, or exhibit spending biases, we intercepted 128 shoppers in checkout lines in a local supermarket. Prior to completing the checkout process and paying for their groceries, respondents answered a series of shopping-related questions pertaining to if they had a maximum dollar limit that they planned to spend during this trip, and, if so, how much they planned to spend. After the participants paid for their groceries, the interviewer investigated a copy of their receipt to determine the total basket price, handed the receipt to the shoppers, and thanked them for their participation. To examine spending biases (spending – budget), we considered only budget shoppers (N=46). On average, budget shoppers exhibited a significant spending bias: they spent a significant $10.52 less (t=4.53, p
Original languageEnglish
Title of host publicationSociety for Consumer Psychology Winter Conference, 24-27 Febr. 2011, Atlanta, Georgia, USA
Place of PublicationAtlanta, Georgia, USA
Pages175-176
Publication statusPublished - 2011
EventSociety for Consumer Psychology Winter Conference -
Duration: 24 Feb 201127 Feb 2011

Conference

ConferenceSociety for Consumer Psychology Winter Conference
Period24/02/1127/02/11

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