Abstract
Economies are instances of complex socio-technical systems that are shaped by the interactions of large numbers of individuals. The individual behavior and decision-making of consumer agents is determined by complex psychological dynamics that include their own assessment of present and future economic conditions as well as those of others, potentially leading to feedback loops that affect the macroscopic state of the economic system. We propose that the large-scale interactions of a nation's citizens with its online resources can reveal the complex dynamics of their collective psychology, including their assessment of future system states. Here we introduce a behavioral index of Chinese Consumer Confidence (C3I) that computationally relates large-scale online search behavior recorded by Google Trends data to the macroscopic variable of consumer confidence. Our results indicate that such computational indices may reveal the components and complex dynamics of consumer psychology as a collective socio-economic phenomenon, potentially leading to improved and more refined economic forecasting.
Highlights
The growth of most modern economies is driven by consumer spending [1]
We need to determine the degree of multicollinearity to investigate whether each variable independently represents consumer confidence, and to ensure the validity of later regression models used to fit a potential C3I based on these 34 independent variables to the Confidence Index (CCI)
Methodological overview. (a) We study the relationship between China’s official CCI data (Y) and Google Trends Data (X). (b) We use a principal components analysis (PCA) to determine the principal components of X, followed by a Granger test and Vector Auto-regression (VAR) to determine the lead or lag relations between X and Y. (c) PCA−1 denotes the inverse operation of PCA to obtain the fitted values of our original model. doi:10.1371/journal.pone.0120039.g004
Summary
The growth of most modern economies is driven by consumer spending [1]. Consumer confidence levels can have significant effects on economic growth. Consumer Confidence Indices (CCI) are designed to measure the degree of confidence that consumers have with respect to the state of the economic system. The basis for many CCIs lies in behavioral science where evidence has accumulated that individual consumer behavior is influenced by a number of emotional and social factors [2, 3] that interact with the consumer agents’ socioeconomic context. The emotional state of consumers as well as their assessment of that of other consumers will shape their subsequent individual consumption patterns [4, 5]. As consumers collectively lose or gain confidence in the state of the economy, PLOS ONE | DOI:10.1371/journal.pone.0120039. As consumers collectively lose or gain confidence in the state of the economy, PLOS ONE | DOI:10.1371/journal.pone.0120039 March 31, 2015
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