A Reason to Spend? the Effect of Unexpected Price and Wealth Changes on Hedonic Purchases

Amar Cheema, Washington University, St. Louis
We demonstrate how an unexpected price decrease or asset-value increase provides consumers a reason to spend. While an income increase affects purchase in a manner similar to a stock value increase, an income decrease inhibits purchase more than an (uncertain) stock value decrease. Increasing spending when asset-values increase but not decreasing it when asset-values decrease can lead to individuals spending more than their means. Using an attitudinal measure of “spending asset-value increases,” data from the 2004 Survey of Consumer Finances reveal that spenders of asset-value increases have higher mortgages and credit card debt than non-spenders.
[ to cite ]:
Amar Cheema (2008) ,"A Reason to Spend? the Effect of Unexpected Price and Wealth Changes on Hedonic Purchases", in NA - Advances in Consumer Research Volume 35, eds. Angela Y. Lee and Dilip Soman, Duluth, MN : Association for Consumer Research, Pages: 157-161.