Abstract

Frugal materialism is a tendency of consumer demand to become more elastic in product durability in response to a tightening budget constraint. This paper proposes a value function-based model of frugal materialism and establishes a close theoretical link between frugal materialism and the slope of value satiation as defined in the decision analytic literature; for both their absolute and relative versions, frugal materialism and increasing value satiation are nearly equivalent to each other. Only some shapes of the value function are thus compatible with frugal materialism, and the shape restrictions involve concepts familiar from models of decision making under risk, even though the proposed model of frugal materialism does not involve any risk. Under the additional assumption of relative risk neutrality, the demand for risky assets of a frugally materialistic consumer should exhibit well-known behavioral patterns associated with increasing risk aversion, and there is only a narrow possibility for frugal materialism to coexist with precautionary saving behavior.

Full Text

Published Version

Talk to us

Join us for a 30 min session where you can share your feedback and ask us any queries you have

Schedule a call

Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.