Showing papers in "Journal of Consumer Affairs in 1990"

Consumer Decision‐Making Styles as a Function of Individual Learning Styles

Abstract: The interrelations between individuals' learning styles and their consumer decision-making styles are explored A Secondary Learning Styles Inventory is developed to measure six characteristics of learning, and a Consumer Styles Inventory is developed to measure eight characteristics of consumer decision making Significant correlations between 21 of the 48 pairs of learning and consumer decision-making characteristics are found Implications for the dissemination of consumer education and information are suggested

An Investigation of Factors Contributing to Consumer Brand Confusion

Abstract: An Investigation of Factors Contributing to Consumer Brand Confusion A quick glance at the shelves of grocery and drug stores shows that many consumer goods companies are employing what has been referred to as an "imitation strategy." Imitation strategies involve any or all of the marketing mix elements, including price, product, distribution, and promotion, and they occur along a continuum of physical and strategic similarity, with one end of the continuum being complete similarity of product and marketing strategy and the other end completely different product and strategy. Thus a series of increasingly imitative strategies is envisioned, e.g., legally permissible emulation of an established brand to emulation of an established brand exceeding legal limits (infringement) to brand counterfeiting. The aim of the creators of imitator brands is to position the new product next to a better known (often market leader) brand. One simple means of achieving this objective is to emulate the package design of the well-known market leader. Such emulation may include not only package shape and size, but also label print style and layout, as well as package color or other distinctive marks (see Diamond 1981 for examples of imitation strategies that have been used). One potential result of brand imitation is consumer brand confusion, where consumers buy the imitator brand thinking it is the original (Loken, Ross, and Hinkle 1986). (1) Brand imitation is not a minor problem. In 1987 alone, the courts dealt with brand imitation cases involving automobiles, fraternities, sportswear, travel companies, professional sports associations, petroleum products, limousine services, fast food restaurants, insurance companies, casinos, pharmaceuticals, wristwatches, and food products, to mention only a few (Fletcher and Wald 1987). Imitation strategies beyond a certain point can have harmful consequences for both firms and consumers. Two occasions for potential harm to firms occur when a consumer unknowingly purchases an imitator brand. First, the consumer may be dissatisfied with the product purchased and attribute his or her dissatisfaction to the original brand, never realizing that the brand consumed was an imitator. Second, the consumer may be satisfied with the imitator brand, become aware that it is not the original brand, and switch brand preferences in favor of the imitator brand. Competitor imitation strategies and resultant confusion can thus harm firms by reducing the number of consumers who become repeat or loyal purchasers. The Lanham Act of 1946 was passed to protect originating firms from this type of harm from imitators (Burgunder 1985). Under this act, hundreds of trademark infringement cases have been litigated in recent years (Fletcher and Wald 1987; Leeds and St. Landau 1987). Imitation costs U.S. firms both time and money: one firm (the Walt Disney Company) has filed fifteen infringement suits against 3,000 individual defendants since 1986 alone, and counterfeiting is estimated to have cost U.S. manufacturers $20 billion in sales annually (New york Times 1988; Roberts 1985). The likelihood of consumer confusion is a key element the courts use in such cases to decide whether or not trademark infringement has occurred (Boal 1983; E.I. Du Pont 1951). Unfortunately, there has been little consensus to date regarding the nature of consumer brand confusion or the extent to which consumers must be confused before courts should rule in favor of the original brand. While the courts focus on consumer confusion in enforcing the Lanham Act, they do so only from the point of view of how such confusion might harm original firms. However, confusion clearly can also harm consumers themselves. Confused consumers may suffer physical harm when they unknowingly buy a product other than the one they intend to buy (Fletcher and Wald 1987). Imitator or counterfeit brands may contain different (and inferior) ingredients from original brands, and unknowing exposure to these ingredients can threaten a consumer's health. …

Time as a direct source of utility: the case of price information search for groceries.

Abstract: Time as a Direct Source of Utility: The Case of Price Information Search for Groceries Dual earner households face increased demands on their time due to labor market activity. These households may choose to engage less in time intensive household activities such as price information search for grocery items. Evidence indicates, however, that working wives do use price information search strategies (Kaitz 1979; Hacklander 1978; Harris and Stevenson 1983). In order to explain the variation in time spent in price information search by dual earner households, a model is formulated that integrates household production theory, the economics of information, and the assertion that time may yield utility directly. In the model, engaging in search increases both income and satisfaction. The resulting "joint production" model of price information search is an extension of the traditional household production and search models that provides more information and insight into the search behavior of dual earners. The possibility that enjoyment of time may affect time spent in an activity has been suggested in the literature but has not been formally modeled (Wilkie and Dickson 1980; Dow and Juster 1980). Economic studies that examined the demand for search time, but did not consider the utility value of time, found that increases in the price of a woman's time may increase or decrease time spent in search for grocery items. Search may also be a normal good (Carlson and Geiseke 1983). Although inconclusive, these studies have provided insight into taste and productivity shifters and family characteristics that may affect the amount of time spent in search. These include educational attainment, age of shopper, sex of shopper, and presence of children (Doti and Sharir 1981; Carlson and Geiseke 1983; Harris and Stevenson 1984). This research is summarized in Table 1. (1) In addition, relationships have been found between time use and ownership of durables (Strober and Weinberg 1980; Bryant 1988). A JOINT PRODUCTION MODEL OF PRICE INFORMATION SEARCH Two frameworks are useful when examining the relationships among increases in dual earner households, enjoyment of search time, and time spent in searching for lower prices. Household production theory outlines how goods and time can be combined to produce commodities that yield satisfaction (Becker 1965). Three categories of time use are leisure, household production, and market work (Gronau 1977). The economics of information asserts that consumers search for lower prices by utilizing time and purchased inputs, such as food advertisements in newspapers, to locate lower food prices (Stigler 1961). Search results in increased purchasing power that is equivalent to an increase in money income. Time is a major input into producing price information, and its effectiveness may vary across households with differential costs of time. A "joint production" model that uses a household production framework and includes search time as a direct source of utility can be illustrated by imposing weak separability on a utility function and focusing on two home-produced goods: meals and price information. The following Lagrangian function is used to maximize a utility function where home-produced meals, search time, and a composite category of other home-produced goods yield satisfaction: L = {Go(Xo,Ho;k),Gp(Xp,Hp),Hs;P} + [lambda]{w(H-Hp-Ho-Hs) + v - Po(Xs,Hs;PD)Xo - PpXp - PsXs} (1) where: U = total utility, Go = meals produced with goods and time, Xo = direct inputs used producing Go, Ho = time inputs used producing Go, k = a vector of productivity shifters, Gp = other home-produced goods, Xp = direct inputs used producing Gp, Hp = time inputs used producing Gp, Hs = time spent in price information search, P = a vector of preference shifters, w = the market wage rate of the major shopper, H = total available time, v = total nonwage income, Po = price of direct inputs used in meal production, Xs = purchased inputs used in price information search, Pp = price of purchased inputs used in home production, Ps = price of purchased inputs used in price information search, and PD = price dispersion. …

Consumer acceptance of cosmetically imperfect produce.

Abstract: Consumer Acceptance of Cosmetically Imperfect Produce While proponents claim that use of chemical pesticides in modern agriculture has provided savings in agricultural resources and increased the quality and quality of food, there is evidence of environmental pollution by chemical residues, of ecological disturbance, and of uncertainty about the residues' long-term effects on human health and well-being (Headley 1967; Spindler, 1983). Rachel Carson's popular Silent Spring (1962) heightened public awareness about the health effects of pesticide residues on humans and wildlife. A replication by Sachs, Blair, and Richter (1987) of the Bealer and Willits 1965 study (Bealer and Willis 1968) showed that concern about pesticide use increased significantly in regard to farm practices, wildlife preservation, and personal health. Recent surveys have found continued public concern about the possibilities of chemical residues in foods. Of the 1,008 participants in a 1984 survey, 77 percent believed that chemical residues from pesticides and herbicides are serious hazards, and 18 percent described them as somewhat of a hazard (Burbee and Kramer 1986). Although three-quarters of the respondents of the January 1989 Food Marketing Institute survey stated that they were completely or mostly confident about the safety of the food in supermarkets, when asked about a specific list of food safety issues, a large proportion said several posed a serious hazard. Eighty-two percent said that residues, such as pesticides and herbicides, were a serious hazard, with an additional 13 percent citing them as something of a hazard (Food Marketing Institute 1989). Because consumption of fresh produce is identified with healthy eating practices in the USDA Dietary Guidelines (USDA-HHS 1980), the possibility of residues is of particular concern to the increasing number of health-conscious consumers (Jones and Weimer 1980). The annual survey conducted by the American produce industry found that only 43 percent of the respondents thought that the government was doing a good job in assuring product safety (Zind 1986-1987). Confidence in government food inspection procedures has also decreased (Picker 1987; Sachs, Blair, and Richter 1987). These concerns have prompted the Food and Drug Administration, the Environmental Protection Agency, and some state regulatory bodies to increase the monitoring of foods and agrichemicals (Zind 1989). Consumers' concerns are exacerbated by disagreements among scientists and other specialists who deal with pesticides about substance and application safety and considerations of short- and long-range costs and benefits (Hawkes and Stiles 1986). The importance of aesthetic standards has been debated by proponents and critics of current pesticide practices. A widespread belief in the produce industry is that consumers insist upon blemish-free fruits and vegetables. Consumer advocates and environmentalists maintain that consumers are willing to trade off some degree of physical perfection for lower use of pesticides (Feenstra 1988). The issue has important consequences in a variety of decisions throughout the marketing process, from the choice of varieties to plant, to the amounts of pesticides and growth stimulants used, and to harvest, culling, display, and advertising practices. A lively controversy has raged for several decades over these issues in regard to fresh market tomatoes. The industry view was expressed by one tomato wholesaler who declared, "The important thing for us in a tomato is to get it to the consumer looking good. No blemishes, no black spots, no softness" (Whiteside 1977). At the same time, surveys conducted by USDA showed a high level of consumer dissatisfaction with the taste and ripeness of market tomatoes. Consumers were much less critical of appearance than these other attributes (Handy and Pfaft 1975; Handy 1976). Contrary to the theories held by many economists, a 1983 Kansas survey found that a majority of consumers believed that food prices were higher as a result of pesticide use (Kramer and Penner 1986). …

Consumers' use of recommended food buying practices.

Abstract: Consumers' Use of Recommended Food Buying Practices For decades consumer educators have been recommending practices that promise to reduce food costs, increase satisfaction with food choices, and improve dietary quality. They have recommended such measures as checking unit prices for different package sizes, examining ingredient labels, and making a shopping list before going to the store. However, little attention has been given to the extent to which consumers have taken this advice or to their reasons for doing so. Food shopping practices, which have been recommended frequently in the consumer information and education literature, have been identified in a recent study by Friedman and Rees (1988). The study reported here extends the Friedman and Rees analysis by examining consumers' acceptance of nine practices that were among those recommended most frequently. Initially this study examined the reported frequency of use of these practices. Next, underlying dimensions of the practices were investigated using factor analysis. This study then focused on patterns in use of the recommended practices. Cluster analysis was used to group consumers who were similar in their use of the nine practices. The identification of usage clusters serves several purposes. When one looks at a cluster of consumers who are using a particular set of practices, assessment of their motives and their overall strategy becomes easier. The identification of clusters of consumers using particular sets of practices along with an understanding of their motives makes it possible to target consumer education and information efforts more effectively. PREVIOUS RESEARCH Grocery Shopper Surveys The annual consumer surveys of the Food Marketing Institute (Opinion Research Corporation 1989) examine a number of aspects of grocery shopping behavior. A few recommended practices have been included among the behaviors and attitudes investigated. Cross-tabulations in the 1989 report suggested that older women in low income households were more likely to say they looked for newspaper ads on bargains and specials and compared prices between supermarkets. Older shoppers with a household member on a medically restricted diet were more likely to read label information on ingredients and nutrition. While these results are of interest, a more comprehensive approach involving a full range of recommended practices would be useful for consumer education and policy purposes. Grocery Shopper Typologies A small group of past studies has focused on broad motivational factors underlying shopping behavior or on factors underlying store preferences or store choices (Westbrook and Black 1985). The concerns identified in these studies resemble those that might find expression in particular food buying practices. The underlying concerns that motivate store choices or preferences may also motivate the use of particular shopping practices. Two studies based on interviews concerning food shopping are of particular relevance. The typology created by Williams, Painter, and Nicholas (1978) was based on questions about the perceived attributes of the respondent's preferred grocery store. On the basis of cluster analysis they identified four groups. * Apathetic Shoppers who generally had negative reactions to their preferred store's characteristics. * Convenience Shoppers who rated their preferred stores high on location and parking, but unfavorably on prices. * Price Shoppers who perceived their stores' prices favorably, but judged the stores inconvenient. * Involved Shoppers who judged prices, quality, convenience, and stores' advertising favorably. Darden and Ashton (1974) developed their typology from respondents' ratings preferred store attributes. Their study is based on a relatively small sample of middle-class suburban housewives, which may have restricted the range of their results. …

American Consumption Patterns and the Price of Time: A Time‐Series Analysis

Abstract: American Consumption Patterns and the Price of Time: A Time-Series Analysis Over the past 30 years American consumption patterns have changed considerably; durables and services have increased their shares of total consumption while nondurables' share has diminished. In total, real personal consumption expenditures per household rose 1.4 percent each year from 1955 to 1984 (Table 1). The annual growth rate of durables consumption per household was 2.9 percent, almost double that of the total. The annual growth rate of services consumption of 1.9 percent was 36 percent greater than that of the total's rate. In contrast, nondurables consumption per household rose only .5 percent per year over this period. Since 1955 female wage rates have risen at the rate of 6.5 percent per year and male wage rates at 6.1 percent per year, while the prices of goods and services (as measured by the implicit price deflator for Personal Consumption Expenditures from the National Income and Product Accounts) rose only 4.8 percent annually. Decomposing this total price change, durables' prices rose at an annual rate of 3.2 percent, services prices at 5.1 percent, and nondurables prices at 4.9 percent per year. Real permanent income per household, however, had risen at the modest annual rate of 1.5 percent over the 30-year period (Table 1). In the latter part of the period--since 1973--price and wage rate increases accelerated while increases in real permanent income per household slowed greatly. To what extent are the changes in the pattern of American consumption due to the usual alterations in demands as income and the prices of durables, nondurables, and services have changed through time? What role have the rising prices of female and male time played? In particular, could the increase in durables and services consumption relative to nondurables have arisen, in large part, because Americans have attempted to find less time-intensive ways of conducting their household activities as their time became more expensive relative to goods and services? The theoretical role of the rising value of time in altering American consumption patterns has been discussed extensively by Linder (1970), but its empirical importance has not been documented. Both men and women spend significant amounts of time in household work (albeit females spend more), and the opportunity costs of this time are high. (1) If the opportunity cost of time rose relative to the prices of goods and services, households would have been induced to find ways of reducing their involvement in household work. Median annual full-time, full-year earnings of females, a measure of the opportunity cost of female time in the household, rose 35 percent more rapidly than the prices of goods and services over the 30-year period while that of men rose 27 percent faster than prices. (2) It would not be surprising then, if some of the changes in consumption patterns had been caused by the rising relative values of time. The statistical estimation of the roles that the prices of male and female time play in altering consumption patterns is the primary focus of this paper. The next section reviews the statistical literature that addresses the relationship between the opportunity cost of time and commodity demand and criticizes it in the present context. Models addressing the issue are then laid out in the third section. The fourth section discusses the data and measures used. The fifth section reports the statistical results, and the sixth section interprets them. The seventh section uses the statistical results to account for consumption trends in the past 30 years. The last section draws implications for the future. REVIEW OF LITERATURE There are two distinct and separate strands in the statistical literature on the role the value of time plays in determining consumption patterns, one cross section and the other time series. …

The Impacts of the California Beverage Container Recycling and Litter Reduction Act on Consumers

Abstract: In late 1987 the California Beverage Container Recycling and Litter Reduction Act went into effect. Like mandatory beverage deposit legislation in other states, this Act is designed to promote returns through the payment of a redemption value. However, unlike traditional legislation, the Act attempts to promote recycling with lower redemption values and more state intervention. This paper presents a methodology for analyzing the impacts of beverage container recycling legislation on consumers. Applying this methodology to California, it is found that the Act will significantly reduce beverage container solid waste and litter, but the net benefits of the Act depend critically on consumers' valuations of intangible benefits.

Consumer Issues and the Elderly.

Abstract: In preparing for this talk on consumer issues facing the elderly, I was intimidated by the enormity of the possible issues. But as an economist, I was also struck by how closely the issues track what economists like to term market failures and redistributional issues. Rather than the mainstream concerns of microeconomics of maxi mization and efficiency issues, consumer interests focus on the prob lems and issues that the market fails to appropriately address. Effi ciency and pure competition constitute the main thrust of neoclassical economic analysis; what is being discussed here are the problems that such a laissez faire system cannot resolve. Consequent ly, there is a natural link between researchers interested in redistribu tional issues (who gets what) and the market failures that require regulation or direct government provision. This emphasis leads rather quickly to research with practical appli cations and away from the realm of the purely theoretical—an em phasis with which I am sympathetic. In fact, when I refer to myself as a "defrocked" economist, I am placing myself squarely in the camp of skepticism about tb i ability of the market to always find the "just" solution. I am glad to see so much interest in how economic issues affect individuals and what adjustments or constraints to the free market would improve the lot of individuals. The 1980s will be remembered, I believe, as the decade of the cult of the free market. Deregulation was a major goal of many promi nent politicians in the 1980s—as was reducing the general role of the

Television Station Standards for Acceptable Advertising

Abstract: Television Station Standards for Acceptable Advertising While a media vehicle's right to reject questionable advertising material possesses a strong potential force for consumer protection, an unanswered question exists of whether the set of standards applied by individual local television stations actually serves as a significant factor working for consumer interests. This study examines the standards applied by television stations in deciding which commercials would be acceptable for broadcast. No United States mass media vehicle--television station, magazine, radio station, or newspaper--is required to accept any commercial advertising material it does not wish to carry. Policies and procedures that determine which ads are acceptable, the business activity generally referred to as the "clearance process," became a major focus of consumer protection concerns following deregulation of government involvement in advertising regulation (Hamm 1988; Hayes and Rotfeld 1988). While government agencies greatly decreased their activities during the past decade, the peril of consumer deception remained (Hayes 1987; Kerton and Bodell 1987). The primary research question addressed is how readily media managers restrict revenue by rejecting advertising to serve consumer protection concerns. Many business leaders presume that the clearance process forms a bulwark of consumer protection (Colford 1987), but whether or not it is an effective force working in the consumer's interest beyond the activities of the most well-known companies is unknown. THE CLEARANCE PROCESS "It is virtually impossible to run an ad ... without exposing that ad or that commercial to prior review by the [vehicle's owner] or one of the owner's representatives" (Bernstein 1986). "Prior review" can mean, in some instances, provision of strong consumer protection against false and deceptive ads, but it does not necessarily translate into a regular oversight practice by all vehicles, nor does it imply that clearance activities by trade associations or individual vehicles are predomenantly oriented toward consumer protection. Until 1982, the National Association of Broadcasters (NAB) Television Code provided a major influence on broadcast advertising practice. To consumers, "undesirable" advertising might be found on nonabiding outlets, and fewer than two-thirds of the television stations followed the voluntary code. However, the code was the basis for advertising acceptance decisions at all major networks and many of the larger stations (Linton 1987; Maddox and Zanot 1984). An advertiser wishing to reach those audiences generally chose to follow the code, with the only alternative choice of incurring the expense and possible public relations headache of making two sets of commercials for code and noncode stations. However, the Justice Department sued the NAB under antitrust laws, claiming that code sections recommending limits on numbers of commercials per hour artificially increased the demand for time, limited its supply and, thus, acted to restrain trade by setting a monopoly price. The NAB responded in 1982 by suspension of all code activities, including those that reviewed commercials for questions of taste and potential audience deception that were not part of the original complaint (Linton 1987). When the NAB dropped the code authority and its procedures, the three major broadcast networks presented written codes that they would follow. the three similar codes incorporated many aspects from the NAB code (Maddox and Zanot 1984) and have been seen to carry an influence akin to that previously held by the NAB. (1) However, while network guidelines and the now defunct NAB code have served as examples of effective regulation, their current impact on individual stations remains uncertain. NBC, CBS, and ABC made extensive cuts in their clearance departments in 1988 (Gordon 1988; Henry 1988). …

Testing Implications of Spatial Economics Models: Some Evidence from Food Retailing

Abstract: Testing Implications of Spatial Economics Models: Some Evidence from Food Retailing A major implication of standard economic theory is that adding firms to a market will increase competition and reduce prices. Adding space to the economic problem complicates the analysis and possibly alters this result. Specific sites are strictly limited in that a site cannot be replicated. If only one firm can occupy a given site, then each firm has locational characteristics that cannot be exactly copied by other firms. Thus, the standard assumption of the ability of identical firms to enter and exit the market does not hold. One of the interesting questions addressed by spatial economics models is the effect on product price (termed mill price in the models) when new firms enter a given spatial market area. Does product price fall, as predicted by standard (nonspatial) economic theory, or is there a different result? Food retailing is an excellent market in which to study this issue. Consumers make frequent visits to retail food outlets, and location of the outlets is important to consumers' transportation costs. The purpose of this paper is twofold. First, theories of spatial economics are reviewed for their implications about the effect of new entrants on product price, and application is made to food retailing. Second, the effect of an entrant on retail food prices in a given spatial market is tested using a unique data set from supermarkets located in Raleigh, North Carolina. REVIEW OF SPATIAL THEORIES The spatial economics problem has been modeled as an oligopolistic market. Due to the small number of firms, it is assumed that each firm must take into account the potential responses of competing firms before settling upon a market strategy. Two conjectures about the potential responses of rival firms dominate the spatial economics literature: the Hotelling-Smithies (H-S) conjecture (Hotelling 1929; Smithies 1941) and the Loschian conjecture (Losch 1954). H-S assumes that each firm conjectures the prices of competitors to be fixed. (1) Under normal assumptions, the model gives results consistent with standard, spaceless theory: the entry of new firms lowers product price. Capozza and Van Order (1978) show that entry in the H-S conjecture can have the opposite result of raising, rather than lowering, prices. This occurs when firm density is low and consumer transportation costs are a large proportion of total product price at the edge of the market. Capozza and Van Order (1978) also show that the results of the H-S conjecture are qualitatively unaltered for any price conjectural variation between one and minus one, that is, firms react to the price changes of competitors, but they don't react on a one-to-one basis. The Loschian conjecture assumes that each firm matches price changes by competing firms on a one-to-one basis. (2) Loschian conjecture results in new entrants raising, rather than lowering, product price for the following reason. The Loschian firm assumes its market area is fixed and consequently sets prices like a monopolist within its market area. Firms are subject to demand elasticities that are net of transport costs. When a linear consumer demand is assumed, price elasticity for any given firm increases when transport costs are subtracted from consumer demand. Higher transport costs result in an increase in price elasticity. As new firms enter the market, each firm loses its most distant customers, resulting in a decrease in average transport costs for consumers, a decrease in aggregate price elasticity, and an increase in product price (Benson and Faminow 1985). This Loschian result, however, is dependent on the assumption of a linear demand curve. Benson (1980a) shows that when a negative exponential demand curve is assumed in the Loschian conjecture, product price falls as new firms enter. The H-S conjecture as modified by Capozza and Van Order (1978), in which firms react to the price behavior of competitors but not on a one-to-one basis, would seem to be the more applicable spatial economics model for food retailing. …

Rehabilitation or Liquidation: Consumers' Choices in Bankruptcy

Abstract: Rehabilitation or Liquidation: Consumers' Choices in Bankruptcy The purpose of the Bankruptcy Code is to establish procedures by which debtors may resolve, in an orderly and equitable fashion, problems associated with insolvency or their inability to repay debts out of income. A major revision in the Bankruptcy Code enacted in 1979 and subsequent amendments significantly changed administrative procedures associated with chapters of the code pertaining to nonbusiness debtors. The purpose of this paper is to identify the legal, environmental, and economic factors that influence the relative benefits and costs of rehabilitation versus straight bankruptcy. A model of the determinants of nonbusiness debtors' choices is empirically estimated based on the cross-state variation in the probability that debtors in bankruptcy filed petitions under Chapter 13 of the code. The change in the availability of Chapter 13 provided by the Bankruptcy Reform Act of 1978 had a noticeable positive influence on the average probability that a petitioner would choose that route to debt relief. But the changes in procedures for Chapter 13 provided by the Bankruptcy Amendments and Federal Judgeship Act of 1984 had an offsetting negative effect on the general probability that a petitioner would choose Chapter 13. Before the Bankruptcy Reform Act was enacted, about 25 percent of nonbusiness petitions for bankruptcy were filed under Chapter 13. Between 1980 and 1983, the proportion of petitions filed under Chapter 13 climbed from 25 percent to 31 percent. By 1988, the proportion had declined, and approximately 27 percent of nonbusiness petitions were filed under Chapter 13. In addition to the above observation that the overall average proportion of nonbusiness bankruptcy petitions filed under Chapter 13 appears logically correlated with changes in the Federal bankruptcy law in the last ten years, considerable cross-state variation exists in the statistic. In the 12 month period ending June 1986, the proportion of total nonbusiness petitions filed under Chapter 13 varied from 3 percent to 69 percent across the fifty states and the District of Columbia. Recent studies have analyzed the causes, costs, benefits, and processes of bankruptcy (American Bankruptcy Institute 1987; Johnson et al. 1982; Sullivan 1982) and the effects of changes in the law on overall trends in bankruptcy (Shephard 1984a; Shephard 1984b; Shiers and Williamson 1984; White 1987-1988). There has been some analysis of the economic circumstances of debtors who choose Chapter 7 versus those who choose Chapter 13 (Sullivan and Drecnik 1984), and there is ongoing debate concerning the optimal bankruptcy legislation. Interest in the determinants of debtors' choices in bankruptcy is based on the need to understand further the economic incentives associated with nonbusiness bankruptcy. There is evidence that unsecured creditors recover a higher percentage of claims in a Chapter 13 procedure relative to Chapter 7. (1) However, current law does not require debtors to choose that avenue to debt relief that produces the lowest loss for lenders and, therefore, the lowest social cost. (2) With greater knowledge of the multitude of factors that influence debtors' choices, policy makers will be in a better position to draft laws to produce the desired social outcome and to evaluate the social consequences of the continuously evolving institution of bankruptcy. DEBTORS' CHOICES FOR DEBT RELIEF Debtors are assumed to repay debt according to the terms of their contracts as long as the net benefit associated with repayment exceeds that of default. The debtor seeking relief from existing credit contracts has several possible courses of action. These include restructuring debts, either privately with creditors or by enlisting the services of a credit counselor; petitioning for rehabilitation or liquidation under the Bankruptcy Code; or outright default. …

The Economics of Rent‐to‐Own Contracts

Abstract: The Economics of Rent-to-Own Contracts Rent-to-own contracts are a common form of contractual arrangement for many types of durable goods, such as television sets, washers, dryers, pianos, and furniture. With rent-to-own contracts, the consumer is under no obligation to make payments for a given length of time (that is, the contract can be terminated at any time upon return of the product), yet if payments are made through a certain term, the consumer receives ownership of the product. While payments are made on the rent-to-own contract, the dealer usually agrees to maintain and repair the product, unlike a strict purchase arrangement. (1) In most states, rent-to-own contracts are exempt from usury ceilings. Rent-to-own contracts have been criticized for their allegedly high interest rates implicit in the payment stream. For example, in comparing the retail price of the product offered by the dealer to the stream of payments on the rent-to-own contract, the North Carolina Attorney General's office has calculated APRs ranging from 70 percent to over 300 percent on televisions and appliances (Thornburg 1987. In a sample of rent-to-own contracts from Atlanta stores, Swagler (1986) found estimated APRs ranging from 117 percent to 168 percent. A flaw in the previous studies of rent-to-own contracts is lack of consideration of the complexities of rent-to-own contracts; that is, the studies have not considered that the contracts are part rental contract and part purchase contract. Calculation of APRs has been done as if rent-to-own payments are pure purchase payments. The purpose of this paper is to examine the complex economics of rent-to-own contracts and to use the resulting conclusions to calculate implicit interest rates on a sample of rent-to-own contracts. An attempt is also made to explain the variation in implicit interest rates among dealers. DERIVATION OF THE RENT-TO-OWN PAYMENT Consider the derivation of a pure-rental payment (RENT) for a consumer durable good. For the owner-dealer of the durable good to rent the good in period i willingly, the rental payment, [RENT.sub.i], must equal or exceed four component costs (Nicholson 1983). The first cost is depreciation of the good in period i, measured by the product of the depreciation rate in i([D.sub.i]) and the cash value of the good at the beginning of the period, P. The second cost is due to maintenance and repair paid by the owner-dealer and is measured by the product of the maintenance rate in period i([m.sub.i]) and the cash value of the good. The third cost stems from the expense of servicing the contract (collecting and processing payments), which are assumed to be unrelated to the cash value of the good. Servicing costs in period i are thus represented simply by [S.sub.ri]. The last cost is the opportunity cost of having the cash value, P, committed to the good rather than in an investment earning the current interest rate. This periodic cost is [r.sub.i]P, where [r.sub.i] includes a risk componet equal to the same level of risk associated with the alternative use of $P in the form of renting the durable good. Thus the minimum required rent payment in period is [RENT.sub.i] = [d.sub.i]P + [m.sub.i]P + [r.sub.i]P + [S.sub.ri]. For simplicity, assume tht [d.sub.i] and [m.sub.i] are constant fractions of P, that [S.sub.ri] and [r.sub.i] are constant over all periods, and assume simple interest earnings for the oppportunity cost. Then (1) becomes [RENT.sub.i] = dP + mP + rP + Sr. The derivation of ownership payments is more straightforward. If the owner-dealer of the durable good sells the good to the consumer and if the consumer makes periodic payments for a total of n periods, then each periodic payment, [BUY.sub.i], is [BUY.sub.i] = PA(r) + [S.sub.o' where A(r) is the annuity factor, A(r) = r/1 - 1 - [(1 + r).sup.-n], r is the interest rate including a risk compoent, in is the number of payments periods, and [s. …

School Lunch Program Participation.

Abstract: School Lunch Program Participation The National School Lunch Program (NSLP) is the largest of the Child Nutrition Programs administered by the United States Department of Agriculture's Food and Nutrition Service, both in terms of funding and number of children served. An average of 27 million children per day were served lunches through the NSLP in 1979. Following program changes and substantial funding reductions embodied in the 1980 and 1981 Omnibus Budget Reconciliation Acts (OBRAs), the number of lunches served dropped to 25.8 in 1981 and 22.9 million in 1982 (United States General Accounting Office 1984). The reductions in participation occurred despite the onset of a recession, which should have signaled an increase in participation. While such decreases in school lunch participation are of concern to hunger groups and legislators, the extent to which the OBRA legislation contributed to the participation decline is unknown. Closing that information gap is the specific focus of this research. More broadly, the objective is to determine what factors affect school lunch program participation and thereby inform future public policy. The problem of obtaining accurate estimates of the determinants of NSLP participation has two dimensions. First, the effects of demographic and economic changes must be isolated to identify correctly the effects of specific program changes on participation. During the period under study, 1979-1981, school enrollments declined in many areas of the country and, as already noted, the economy headed into a deep recession. Second, required information regarding the number of students eligible for subsidized school lunches is not directly reported and must be estimated. The most suitable data for determining eligibility and for analyzing program participation are household-, student-, and school-level data. Unfortunately, high collection costs preclude frequent acquisition of such data. The two-dimensional problem of obtaining an accurate picture of school lunch program participation is addressed by developing and implementing a two-stage model of county-level program participation in New York State. The data for New York counties are reasonably accessible and similar data should be available in other states. In the crucial first stage of the model, pre- and post-OBRA eligible populations are predicted by estimating poverty rates for each county. The second stage utilizes those predictions in an empirical model of county program participation designed to distinguish the effects of legislative changes from those associated with demographic, economic, and behavioral changes. Background material on the school lunch program and the OBRA legislative changes are presented first, followed by the empirical methodology, results, and conclusions, in turn. THE NATIONAL SCHOOL LUNCH PROGRAM The National School Lunch Program was established in 1946 with the passage of the National School Lunch Act. The primary objective of the legislation was to assist in providing adequate nutrition for the nation's school children. The Act established an entitlement to Federally subsidized nutritious lunches for all school children. The subsidies were considered an investment in the health, education, and future productivity of children throughout the nation. The 1946 Act also included funds for purchasing and distributing surplus farm commodities to schools. By incorporating this politically acceptable means for disposing of government-purchased agricultural surpluses, the appeal of the legislation was broadened. The operation and funding of the lunch program evolved over the years. Currently, three different categories of lunches are served: free, reduced-price, and full-price. Lower-income students apply and eligibility is determined for the free or reduced-price lunches according to family size and income. All students are eligible for a full-price lunch. …

Family Composition, Parental Time, and Market Goods: Life Cycle Trade-Offs

Abstract: Family Composition, Parental Time, and Market Goods: Life Cycle Trade-Offs Analyzing the joint determination of family consumption and time allocation has been the subject of many recent studies (1) that appeal to Becker's (1965) and Gronau's (1977) theoretical work. However, as Kooreman and Kapteyn (1987) note, the analysis of time spent by members in household production of goods and services and its relationship to the demand for either market goods or leisure is restricted by lack of detailed time use data. Studies designed to examine family expenditures usually collect labor supply data but little information regarding other time allocation decisions. Similarly, time budget studies usually collect little family expenditure information. Thus, previous studies of the joint determination of demand for time and goods examine expenditures among commodity groups omitting the time allocation (home production and leisure time) function (e.g., Blundell 1980; Blundell and Walker 1982) or examine time allocation decisions among activities omitting the consumption function (e.g., Kooreman and Kapteyn 1987). In this paper results are reported from a unique study that incorporates information about both family expenditures and time allocation. Of particular interest is further examination of family composition's influence on full income allocated to leisure and home production activities as well as to market-purchased goods. The hypothesis of interest is one suggested by Deaton and Muellbauer (1986), that families with young children face large time (foregone leisure) relative to goods expenditures, and the trend reverses as children age. The first step toward accomplishing the stated objectives was to estimate parameters of a nonlinear expenditure system using a linear logit specification that includes a continuous measure of family composition (Tyrrell and Mount 1982; Douthitt and Fedyk 1988 (2)). The present analysis differs from the authors' previous study where family composition influenced only goods consumption. The purpose of that study was to examine substitutions made by families within categories of current consumption in response to changes in family composition. In that model it was implicity assumed that earned income (leisure) and levels of home production were exogenous to current consumption decisions. The present study examines how the presence of children influences not only current consumption decisions, but also time allocation decisions and income generation. Finally, pursuant to the objective of comparing family composition effects on time versus goods trade-offs, parameter estimates are used to calculate expenditure and family size elasticities and to conduct life cycle simulations of full income allocations to time and goods over the life cycle. The remainder of the paper is organized as follows. Section two reviews the theoretical underpinnings of the model used. The third section explains the model specification. Section four discusses the data and statistical method used to estimate the model's parameters. Section five presents parameter estimates, and section six contains life cycle simulations of full income allocation decisions. The final section summarizes findings and compares the results to previous studies. The present analysis embraces Becker's (1965) theory of time allocation. Relying on Gronau's (1977) adaptation of this theory, it is assumed that families maximize household utility through the consumption of combinations of goods and services (X) and leisure (R). Goods and services are either purchased in the market place ([X.sub.m]) or produced in the home ([X.sub.h]). A family's utility is thus: U = U(X,R) (1) where X = [X.sub.m] + [X.sub.h]. Expenditures for market-purchased goods and services are made subject to the budget constraint: [piX.sub.m] = WN + V (2) where [pi] is an index of market prices, W and N are, respectively, market wage and hours worked in the market, and V is unearned income. …

The Hierarchy of Consumer Participation: Knowledge and Proficiency in Telecommunications Decision Making

Abstract: The Hierarchy of Consumer Participation: Knowledge and Proficiency in Telecommunications Decision Making Consumer research reveals a differential receptiveness on the part of consumers to the understanding and use of consumer information and education. Receptiveness to consumer education may vary according to (1) cognition, (2) social background characteristics, (3) occupational grouping, (4) participation in community affairs, (5) level of perception of consumer problems, (6) propensity to complain, and (7) information seeking methods (Bourgeois and Barnes 1976; Wackman and Ward 1976; Wilkie 1976; Hempel and McEwen 1976; Bloom 1976; Thorelli and Engledow 1980; Alder and Pittle 1984; Hyman 1986; Maynes 1988). Similar patterns have been identified for complaint behavior and participation (Hill 1982; Warland, Herrmann and Moore 1984; Hyman 1986, 1987; Miewald and Comer 1986; Kroll and Stampfl 1986; Price, Feick, and Higie 1987; Andreasen 1988). Participation in American society also is not evenly distributed throughout the population. Those who participate in social, economic, and political affairs tend to reflect higher levels of income, education, and age (Verba and Nie 1972). Different patterns of participation have also been identified. Some citizens choose to remain outside, or on the periphery, of decision making. Others become intensely involved. A "hierarchy of political participation" has been identified (Milbrath 1965; Milbrath and Goel 1982). (1) Previous research has tended to be discipline-based and to address specific aspects of either consumer behavior or political participation. This article takes a step toward synthesis by using the logic of the political participation model, and it examines several aspects of consumer decision making and consumer education in a single study. Four different sets of variables--knowledge about a decision area, independence of decision making, use of information, and propensity to influence others--are used to establish a "hierarchy of participation in consumer decision making," and the relationship to social background characteristics and the propensity to be aware of and take action on related consumer problems are examined. Data from an empirical study of mandated consumer decision making in the wake of the deregulation of telecommunications are used as the basis for a model that posits the existence of conceptually and empirically distinct subgroups based on a combination of variables related to proficiency in consumer decision making. CONTEXT AND METHODS Attendant to the deregulation of the telecommunications system in the United States, all consumers were required to make decisions in several areas in the year prior to this study. There was extensive coverage in the media and by consumer groups, regulators, and the telecommunications industry. Informational mailings and decision requests from the utility company went to each household. Thus, it is assumed that consumers had similar opportunities to know about the decision areas (although all consumers would not be expected to avail themselves equally of the opportunities). To the extent possible in a field situation, the time element, information availability, and opportunity to know are held constant. The situation provides a unique opportunity to examine consumer behavior in a quasi-experimental situation where one can make the assumption that everyone had an equivalent opportunity to know and to act, and everyone made a decision in a similar time frame. Data for the analysis are from a 1985 representative statewide sample of residential telephone customers in Pennsylvania, the state with the fourth largest urban and the largest rural population. A telephone "penetration rate" of 97 percent in Pennsylvania means that for present purposes the full range of consumers had an opportunity to be included in the sample. The sample was selected by random digit dialing procedures using the operating ranges of numbers for each local exchange. …

Agreement Between Product Ratings Generated by Different Consumer Testing Organizations: A Statistical Comparison of Consumer Reports and Which? from 1957 to 1986

Abstract: Agreement Between Product Ratings Generated by Different Consumer Testing Organizations: A Statistical Comparison of Consumer Reports and Which? from 1957 to 1986 This study constitutes a first attempt to determine the agreement existing between product quality ratings published in the leading consumer testing magazines in the United States and abroad. For many years such ratings have been guiding the purchase decisions of millions of consumers; yet, little, if anything, is known about whether the ratings provided by one magazine agree with the ratings provided by another. This question is of fundamental importance because a lack of agreement would suggest that the magazines' product ratings are not a solid foundation upon which consumers could or should base their purchase decisions. On the other hand, close agreement would suggest consistent measurement across magazines. To put the matter more precisely, this study attempts to assess the reliability of product quality ratings published in consumer testing magazines (or, in other words, the extent to which different magazines agree on their ratings of the same product). The validity of the ratings is not directly assessed (whether they do indeed measure product quality). However, neither are validity considerations completely ignored by the study in that high reliability is a necessary but not sufficient condition for high validity. Thus, an unreliable measure cannot be valid, but a reliable measure may or may not be valid. Before addressing the reliability question it is helpful to provide some background information for the study. For some years now, the two leaders in consumer product testing have been Consumers Union in the United States, which has published Consumer Reports since 1936, and the Consumers' Association in Britain, which has published Which? since 1957. Both organizations are nonprofit, and their publications, Consumer Reports and Which?, are monthly magazines featuring comparative test reports for a variety of consumer products. Both magazines rate products by brand and model, and both have large circulations (3,800,000 for Consumer Reports and 720,000 for Which?). (1) METHOD The task confronting the investigator in this study was somewhat akin to rummaging through dozens of used furniture stores in search of a few valuable antiques. Rare coincidences of circumstance were being sought--instances of tests reported in both Consumer Reports and Which? focusing on the same product category, and, more specifically, on the very same product brands and models. Also, to ensure data comparability, the tests reported had to use the same or similar evaluative dimensions to assess the common brands and models. Finally, to avoid the possibility of the evaluative data generated by one magazine affecting the evaluative data generated by the other, the tests reported in the two magazines had to be conducted independently of each other. To arrive at a study sample meeting these criteria, a series of gatekeeper steps was established. Each had the effect of reducing the potential pool of thousands of test report pairs (one member from Consumer Reports and one from Which?) to a much smaller subset of eligibles that would constitute the study sample. In 1987, copies of all issues of Consumer Reports and Which? for the years 1957 through 1986 were secured (the 30 years of overlap for the two magazines). Next, the copies were examined in an effort to find identical consumer product categories tested by the two magazines within a period of two calendar years (e.g., a test of toasters in Consumer Reports in 1974 and a test of toasters in Which? in 1976). After completing this step, each identified test pair meeting the two-year criterion for the same product category was scrutinized to see if the American and British tests had evaluated two or more of the same brand and model names. To illustrate this procedural step with the 1970s toaster example, this test pair would qualify if both its American and British members had evaluated at least two of the same brands and models, say, a Sunbeam Model 18A and a General Electric Model 6B. …

Consumer and welfare losses from milk marketing orders.

Abstract: Consumer and Welfare Losses from Milk Marketing Orders The regulation of the U.S. dairy industry has two major components. First, a Federal milk marketing order system exists that regulates the markets for Grade A fresh fluid milk. This system has been in effect since the passage of the Agricultural Adjustment Act of 1937. Second, there is a price support program under which the Commodity Credit Corporation (CCC) purchases butter, cheese, and nonfat dry milk at announced support prices, and the government stores and distributes stocks of these products. This program supports the price of Grade B milk, which m ay only be used for manufactured milk products, and surplus Grade A milk. Under the Federal Milk marketing order system, Grade A milk is priced according to its use and a higher price is charged for milk used for fluid consumption than for milk used for manufactured milk products. Individual prices are set for various regions of the United States. The regulations that set prices for specific regions are called milk marketing orders. They establish minimum prices for 80 percent of the Grade A milk sold in the United States and also establish the methods by which farmers are reimbursed for Grade A milk. Farmers receive a "blend price," which is a weighted average of prices paid for different classes of milk in their region. The milk marketing system is further restricted by policies for reconstituted milk. Although the technology for reconstituting milk has been available since the 1953s, reconstituted milk is used in only a few areas because of USDA policies that make it more expensive than fresh milk. The purpose of this study is to measure the consumer and welfare losses from milk marketing orders in 1985. Losses are based on potential changes in prices and quantities when milk marketing orders are eliminated and replaced by a competitive system. There are no changes in the dairy price support program. In addition, consideration is given to the impact of marketing orders on the sale of reconstituted milk and the effects of existing reconstituted milk policies on consumers. The results of this study should be of interest to consumer educators and consumer policy analysts who are concerned with the impact of regulations on consumers and the economy as a whole. BACKGROUND: MILK MARKETING ORDERS A Federal milk order is a regulation promulgated by the Secretary of Agriculture, published in the Federal Register and codified in the Code of Regulations. It defines a particular geographic region that is subject to government regulation (MacAvoy 1977, p. 2). Milk marketing orders apply only to Grade A milk. Grade A milk is milk that meets local sanitary and health requirements so that it may be used for fluid consumption. Ungraded or Grade B milk is milk that is not subject to local health regulations and can only be used in the production of manufactured milk products. Grade A milk that is produced in excess of fluid milk requirements can also be used in the production of manufactured milk products. Approximately 85 percent of all milk produced is Grade A and of this only 45 percent is used for fresh fluid milk products. The remainder is diverted into manufactured uses (USDA 1984, p. 24). In markets where producers (farmers) have chosen to be covered by Federal orders, milk marketing orders establish the minimum prices that handlers must pay for raw Grade A milk and the prices that are received by the producers of milk. Milk handlers pay classified prices that are determined by use (class) to which the handler ultimately puts the milk. Milk marketing orders may have two or three classes of milk established. Class 1 milk products include fluid forms such as fresh whole milk, skim milk, and buttermilk. Class 2 products include soft manufactured products such as sour cream and cottage cheese. CLass 3 products are more solid manufactured products such as cheese, butter, and milk powders. …

Cost and Quality Factors in Parents' Choice of After-School Child Care.

Abstract: Cost and Quality Factors in Parents' Choice of After-School Child Care What are parents to do when their child is dismissed from school, but their schedules do not allow them to be at home when the child arrives? Ostensibly, the problem is no different from any other consumer demand situation: parents can purchase the quantity and quality combination of after-school child care that yields them the maximum net benefit give their available resources (Maynes 1976) In practice, the after-school child care choice decision has unique aspects that render it worthy of special consideration In the first place a virtually costless alternative exists to market-purchased services in the form of the self care, or "latchkey," arrangement Children can mind themselves until a parent comes home (Behan 1985; Garbarino 1981; Pecoraro 1984; Rooney 1983) In the second place, the inevitable cost-quality tradeoff, made necessary when better quality service can only be obtained at increased cost, has a special poignancy where child welfare is concerned (McMurray and Kazanjian 1982; McNairy 1984; Turner and Smith 1983) These factors, conceived in the light of a general and apparently worsening excess demand situation in the market for after-school child care (Bruno 1987), warrant careful modeling and analysis of the child care choice decision Possibly due to the aforementioned primal concern with the child welfare aspects of the situation, past research into parents' choice of after-school child care has tended to concentrate on the quality aspects of the choice The focus of research has generally been comparison of alternative arrangements in terms of their impact on the child's social development or physical well being In a recent paper, Walden (1989) has provided convincing evidence that high quality child care goes hand-in-hand with high cost Other sojourns into the cost-quality interface have been few (see More 1980; Owens 1984; Rodes 1975; Powell and Widdows 1987; Rothschild 1978) The lack of consideration of how cost and quality concerns interact in the parent's after-school child care decision is not due to any paucity of data on the cost side As recent issues of the Family Economics Review have shown, a wealth of information exists on cost from several major data series (Schwenk 1986) Rather, an interdisciplinary approach to the subject is missing Researchers on after-school child care have tended to approach the subject from their narrow perspectives of child care specialist, family economist, or preschool educator The purpose of the present communication is to propose a model and related data gathering exercise that bridges these disciplines A MODEL OF AFTER-SCHOOL CHILD CARE CHOICE Following Becker (1981), parents can be hypothesized to choose the cost-quality combination of child cate that maximizes the following utility (u) function: U = u(C, q, Z1, Zm) where C is the amount of child care consumed, q is the quality of child care, and Z1, Zm are quantities of other goods consumed Parents are constrained in their choice by family resources available If pcq is the cost of a unit of child care of quality level q, then the budget constraint facing the family can be represented as: Y = pcqC + pz1Z1 + + pzmZ where Y is family resources Maximizing utility subject to the constraint and solving for equilibrium conditions gives demand functions in terms of market prices of the general form:(1) D = d(pcq, pz, Y) where D can represent demand for child care quantity and quality Application of the model is not quite so straightforward as the theory behind it For one thing, the price and quality of child care and family resource variables are complex and multifaceted For another, the market data on price and quality are not as readily observable by parents as, say, those of a regularly purchased food item …

An Ordered-Response Income Adequacy Model

Abstract: An Ordered-Response Income Adequacy Model Individual and social well-being are central to analysis of equity and social progress. It is natural that the measurement of well-being is a point of convergence for economics and other social sciences. Interest currently exists in using subjective data to estimate welfare or utility functions for individuals. There is corresponding interest in the comparison of welfare functions across households. Analyses of the theoretical potential for improvements in welfare, the incidence of poverty, and the formation of preferences can use such estimates and comparisons. The "Leyden model," so known for its place of origin, dominates work on measuring welfare levels of individuals from subjective data.(1) Analysis using the Leyden model (LM) have worked on specifying poverty lines, measuring economic progress, testing for optimal income distributions, and estimating the value of social service benefits and environmental improvements. This study introduces a new approach to estimating individual welfare levels from subjective data. It also deals with comparing welfare measures across individuals. The types of data used are plentiful in secondary sources. The approach does not require some of the assumptions of the LM that are objectionable to many economists.(2) The basic tools of the approach developed here, ordinal response models and random utility theory, are not new. The way they are combined is new, as is their use with introspective data on welfare. The neoclassical economists' equivalent and compensating variations follow from the model. In mathematical form, these measures are very similar to measures used in more ad hoc fashion in the LM literature. the approach is a bridge between neoclassical economic welfare measures and LM in the type of data with which it starts and in the form of welfare computations. This paper assumes familiarity with neoclassical economic welfare measures. It also assumes familiarity with the philosophical underpinnings of ordinal utility and revealed preference and with various approaches to estimating family equivalence scales. The proper provides a brief overview of the LM. There are excellent and inclusive review articles on the LM for the interested reader. THE LEYDEN MODEL The Leyden model is the most rigorous previous work in economics using subjective assessments of income adequacy. This section gives the model's specification, assumptions, and results, so that they can be compared with those of the ordered-response model. The model starts with a survey question: Taking into account my (our) condition of living, I would consider a net family income per week/per month/per year as excellant if it were above _____, and good if it were between _____ and _____. There is a similar question for amply sufficient, sufficient, barely sufficient, insufficient, very insufficient, bad, and very bad (open-ended category). For each household, the verbal descriptions evaluate hypothetical incomes, denoted by [Y.sub.h] can be a representative income for the interval. For instance, [Y.sub.h] may be the midpoint for the income interval associated with "good." The next step is to associate a numerical utility score with each verbal description. In general, scores depend on the number of questions and assign equal intervals between any two adjacent questions. The result of this step is a set of incomes and corresponding utility numbers for each household. The LM postulates that utility numbers and incomes for any household follow the log-normal cumulative distribution function, U([Y.sub.h]) = N[(In Y.sub.h - m)/s]. The utility function for each household has partners m and s. U([Y.sub.h]) maps from income to utility on a zero-one continous scale. Parameter m is the log of income associated U([Y.sub.h]) = 0.5. It is the log of income at which the cumulative normal distribution function that describes utility has its inflection point. …

The Impact of the Employment of the Wife on the Achievement of Home Ownership

Abstract: The Impact of the Employment of the Wife on the Achievement of Home Ownership Because of rapidly rising housing costs relative to income during the 1970s and early 1980s, the suggestion has been made that one of the ways, perhaps the only way, that families could change from rental tenure to home ownership was to have more than one individual in the household in the labor force (Frieden and Solomon 1977). The purpose of this paper is to assess the impact of the income, wage rate, and hours worked by female spouses in couple-headed households on the change from rental to home owner status. The sample is limited to husband-wife households because of the interest in ascertaining the contribution of the second income to the change in tenure status. HOUSING ADJUSTMENT AND HOME OWNERSHIP The housing behavior of families and households has long been characterized as an adjustment process whereby households seek to bring their dwelling units into balance with their needs (Riemer 1943, 1945, 1947; Rossi 1955; Morris and Winter 1975, 1978, 1985). Rossi (1955), Chevan (1971), and Sabagh, Van Arsdol, and Butler (1969) pointed out that changes in the family's needs are largely the result of changes in its composition throughout the life cycle. These changes result in disequilibria that, in turn, cause the family to engage in behavior that brings about a new equilibrium (Goodman 1976; Onaka 1983; Onaka and Clark 1983; Quigley and Weinberg 1977). In the United States one of the most important norms for housing conditions is that the dwelling be owner occupied (Morris and Winter 1975, 1978, 1985; Tremblay and Dillman 1983). In spite of predictions to the contrary, little evidence exists that this norm has changed over the past 50 years. The ability of the American family to achieve the norm is in question. Popular belief holds that the only way American families can switch from renting to owning is to have both adults in the household receiving labor income. This hypothesis has not been tested, however. Studies of factors that influence housing tenure have been of two types: those examining the prevalence of home ownership along with factors that affect ownership in some segment of the population (Carliner 1974; Morris, Crull, and Winter 1976; Li 1977; Roistacher 1974a, 1974b) and those examining the tenure choices of movers (Chi 1984; Varady 1983; Zimmer 1973). The latter analyses are of interest because, presumably, households that move have the opportunity to redress a tenure disequilibrium. While it is possible to change tenure without changing residence, as in lease-with-option-to-buy arrangements or purchasing one's apartment when a multifamily dwelling changes from rental to condominium tenure, such situations are far less likely than simply changing tenure by moving. Almost without exception, researchers note a positive correlation between ownership and both income and wealth (Li 1977; Boehm 1981) and that upper income movers are likely to become owners as a result of a move, while lower income families are likely to continue to be renters (Chi 1984; Ihlanfeldt 1980). Other factors associated with the prevalence of home ownership are (1) age (households headed by an older individual are more likely to be homeowners), (2) household size (in general, large households are likely to own, probably because there is a correlation between tenure and dwelling size and because owner-occupied dwellings are more spacious), (3) size of the city (the larger the city, the lower the rate of home ownership), (4) region of the country (there are higher rates of ownership in the Northeast, perhaps because rental housing is in short supply), (5) sex of the head of the household (female-headed households are less likely to own than are male- or couple-headed households), and (6) race (white families are more likely to own than black families) (Rossi 1955; Speare 1974; Long 1972; Okraku 1971; Roistacher 1974a, 1974b; Goodman 1974, 1976; Duncan and Newman 1975; Foote et al. …