WEBLENA EFFECT- [eng. Veblen effect] an economically unjustified increase in demand for some expensive goods from certain categories of consumers, if the price of these goods rises. Synonymous with Veblen's paradox. V. e. observed only when ... ...
SNOB EFFECT- [eng. Snob Effect] psychological effect of special perception of price dynamics by certain categories of consumers and denial of the traditional reaction to this dynamics on the part of the majority of consumers. A snob is a person who carefully follows tastes, manners ... Marketing. Big explanatory dictionary
Demand- market expression of need, representing the desire and ability of people to acquire economic benefits. From a quantitative point of view, they talk about the value of C. Law S. reflects the inverse relationship between the price and the amount asked ... Economy. Social Science Dictionary
Consumer choice- is a choice that maximizes the utility function of a rational consumer in conditions of limited resources (money income). The utility function is maximized in the case when the consumer's monetary income is distributed in such a way that ... ... Dictionary of Economic Theory
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Big Eight is a group of eight industrial developed countries holding regular meetings at the highest level... The G8 summit, which includes the countries: Great Britain, France, Italy, Germany, Japan, USA, Canada, as well as Russia. Contents >>>>>>>>>>> ... Investor encyclopedia
second, we assume that in each period income is generated and the buyer spends. This statement is true for all consumers. Thus, spending in one period does not coincide with spending in the next. This means that only one price can exist during any unit period and that this price can only change from period to period. Therefore, the imbalance can be leveled out only during two or more periods.
Third, it is important to clearly define the terms we use and identify those aspects of demand that we will consider. Consider the following classification, which reflects most of the motivations for consumer demand. The demand for consumer goods can be: FUNCTIONAL and NON-FUNCTIONAL.
Functional demand means that part of the demand for a product is due to the inherent qualities of the product itself.
Non-functional demand means that part of the demand for a product is due to some other factors, and the most significant part of it is due to external influences on utility.
Leibenstein identified three most typical cases of such mutual influences:
1. the effect of joining the majority... This is the amount by which the demand for a product will increase due to the fact that others also buy the same product. It expresses the desire of people to purchase goods in order to keep up with life, to correspond to the circle of people in which they would like to move, in order to be fashionable and elegant, or in order not to be a “black sheep”.
2. snob effect... This is the amount by which demand will fall due to the fact that others also consume this good (or increase the consumption of this good). It expresses the desire of people for exclusivity, the desire to stand out from the crowd, to be different from each other.
3. Veblen effect... This is the amount by which demand will increase because the product has a higher, not a lower price. The Veblen effect, in contrast to the snob effect, does not depend on the consumption of others, but on the price.
It is also necessary to say a few words about speculative and irrational demand. The first means the fact that people will often hold back the offer of a product because they expect the price to rise.
By the second, they mean purchases that are not only not planned, but also occur under the influence of a sudden momentary desire, whim, whim and satisfy them, and not rational goals.
Chapter 1. The effect of joining the majority
In this chapter we will try to investigate the case where the effect of joining the majority is significant. And the simplest case is when an individual customer will ask for more of a product at a given price, because other customers are also asking for more of that product.
We will carry out our analysis based on the following simplifications:
Ø It is assumed that all consumers know the quantity that each individual consumer or all buyers together will ask for at any given price - after they have responded to the demand shown by everyone else. But if ignorance on the part of consumers is allowed, we will need to determine its degree and understand how the consumer receives accurate information.
Ø We assume that the demand of consumer A (at a given price
The effect of joining the majority is understood as the amount by which the individual demand for a product increases due to the fact that the market demand for it is expanding, or in other words, due to the fact that other people also buy this very product. The effect reflects the desire of people to keep up with life, from fashion, to correspond to the social circle in which they would like to move. The more the curve of individual demand (d) shifts under the influence of an increase in market demand (D), the higher this effect.
The snob effect
The snob effect is characterized by the amount by which individual demand will decrease due to the fact that others also consume the given product, i.e. due to increased market demand. This effect expresses the desire of people for exclusivity, the desire to be different from each other, to stand out from the crowd. The drop in demand is the greater, the greater the demand for this product is from other buyers.
Both the joining the majority effect and the snob effect can be quantified through the coefficient of quantitative elasticity, which shows the degree of quantitative change in individual demand when market demand changes by 1%.
The coefficient is calculated using the formula:
§ qi - the value of individual demand for product i;
§ Qi - the value of market demand for product i;
1. If Eq> 0, then there is the effect of joining the majority
2. If Eq< 0, то наблюдается эффект сноба.
The absolute value of this coefficient characterizes the magnitude of the considered effects.
Shown consumption effect
The exponential consumption effect, or the Veblen effect, reflects such a seemingly paradoxical phenomenon as an increase in demand for a certain product due to the fact that it has a higher price than its counterparts.
The Veblen effect characterizes the amount by which individual demand increases due to an increase in the price of the product in question.
The effect is observed when the consumer associates a higher price with higher prestige, which causes additional demand.
Inverse relationship between the price and the amount of demand remains, but the demand curve itself shifts under the influence of the effect to the right, since in the eyes of the consumer the same product with a low price (P1 not prestigious) and a high price (P2 prestigious) are different goods with different demand curves, respectively d (P1) and d (P2).
The quantitative value of the Veblen effect can be estimated through the price elasticity of demand, which characterizes the degree of change in demand when the price changes by 1%.
The coefficient of price elasticity of demand is calculated using the formula we already know:
Q (P) - price demand function
P - market price
If the Veblen effect is absent and the product does not belong to the Giffen product group, then the price elasticity coefficient is negative, E<0. Положительное значение коэффицента, E>0, may indicate the existence of an exponential consumption effect, the more significant the higher the absolute value of this coefficient.
Speculative demand
Speculative demand arises in conditions of a shortage of a particular product, when the market supply is insufficient or artificially constrained in anticipation of price increases. Under these conditions, the demand curve also shifts to the right.
Irrational demand
Irrational demand unites all purchases that are not only not planned by the consumer, but also occur under the influence of a sudden momentary desire, whim, whim. Many large stores deliberately stimulate this kind of demand from such a specific consumer group as parents with children by installing racks of candy and fun toys at the cash registers.
Supply law and its curve on the graph; non-price factors of market supply and features of the graphical reflection of their action.
The consumer, striving to keep up with others, acquires what others buy. It depends on the opinions of other consumers, and this dependence is direct.
The effect of joining the majority is understood as the effect of increasing consumer demand associated with the fact that the consumer, following generally accepted norms, buys the same product that others buy.
It is through the effect of joining the majority that various fashion trends are explained, when people acquire things that are completely unnecessary, but bought by everyone, because it is fashionable.
The snob effect.
In this case, the consumer strives to stand out from the crowd. True, in this case, the individual consumer depends on the choice of others, but this dependence is inverse. Therefore, the snob effect refers to the effect of changes in demand due to the fact that other people consume this product. Usually the reaction is directed in the opposite direction in relation to the conventional one.
Veblen effect
This term H. Leibenstein calls prestigious or conspicuous consumption, vividly described in the book "The Theory of the Leisure Class" (1899) by T. Veblen, when goods are either purchased in order to make an indelible impression on others. In this case, the price of the product consists of two component parts: its real value and prestigious. Therefore, the Veblen effect is understood as the effect of an increase in consumer demand associated with the fact that the product has a higher (and not lower) price.
The Veblen effect is similar to the snob effect. However, the fundamental difference is that the snob effect depends on the consumption of others, while the Veblen effect depends primarily on the price. So, for example, a thing from a certain designer is prestigious and costs much more than a thing of similar quality, but "simple" production.
Topic number 7. "Entrepreneurship: content and forms"
Plan:
Goals and motives entrepreneurial activity
Environment and functions of entrepreneurship
Entrepreneurship factors
Organizational forms entrepreneurship
Question 1. The content and characteristics of entrepreneurship
Entrepreneurship- it is proactive, associated with economic risk and aimed at finding best ways use of resources - activities carried out with the aim of generating income and increasing property. By its economic nature, entrepreneurship is inextricably linked with the market economy and is its product.
The economic nature of entrepreneurship is characterized through its characteristics: initiative, commercial risk and responsibility, combination of factors of production, innovation.
Entrepreneurial initiative.
Entrepreneurship is an initiative activity. The constant striving to search for something new, whether it is the production of new products or the development of new markets, in a word, the search for new opportunities to derive benefits - distinctive feature entrepreneur. Entrepreneurial initiative is the desire to realize the opportunities provided by the very process of market exchange, carried out to the mutual benefit of the participants in this process. Entrepreneurship should not be associated with deception and violence, but with the extraction of benefits through the satisfaction of social needs - with the "spirit of non-violent acquisition."
The initiative requires a certain amount of economic freedom. When the level of regulation of entrepreneurial activity is too high, initiative activity decreases, turning into business stagnation. In this sense, creating conditions for enhancing the initiative of business entities is the key task of the transition to entrepreneurship.
Commercial risk and business liability.
However, the asymmetry of information also creates a certain uncertainty in the activities of an entrepreneur. Uncertainty arises both in connection with purely market properties - changes in market conditions, prices and consumer preferences, and due to the specifics of entrepreneurship, expressed, first of all, in the unpredictable reaction of the market to the proposed solutions. Thus, the entire reality surrounding the entrepreneur is presented in the form of uncertainty beyond his control, which generates commercial risk.
Commercial risk differs from risk in general in that it is based on sober calculation and taking into account possible negative consequences. The desire for success is always balanced by economic responsibility. The economic responsibility that accompanies risk poses the challenge for the entrepreneur to master and manage risk. And if the entrepreneur is not able to eliminate market uncertainty, then he is quite capable of reducing the risk. The most well-known risk mitigation mechanism is insurance, which transforms risk into insignificant additional costs. The problem, however, is that the innovative nature of entrepreneurial activity makes it extremely difficult to reliably assess the probable risk, thereby narrowing the possibilities of applying insurance specifically in the field of entrepreneurship. The entrepreneurial initiative, on the contrary, presupposes the creation of new, previously not encountered situations, the probable outcome of which is very difficult to assess, and sometimes impossible. Consequently, the opportunities for insurance of business activities are decreasing. Another way to reduce risk is to share it with other stakeholders. Meanwhile, by helping to reduce risk (possible loss for an individual participant), this method undermines entrepreneurial motivation, since entrepreneurial income will be divided among the participants in the enterprise.
The contradiction that arises between the motivated desire for risk and the desire to reduce the degree of risk can be resolved by creating a risk management system. In the very general view such a system should include: 1) identification of sources of risk and consequences of activities under risk conditions; 2) adaptive measures to overcome possible negative consequences.
Risk as a property of entrepreneurial activity characterizes not only the specifics of entrepreneurship. It also has general economic significance. The presence of risk forces the entrepreneur to scrupulously analyze the options for possible alternatives, choosing the best and most promising of them, which leads to progressive shifts in productive forces and an increase in the efficiency of social production. On the other hand, the presence of risk in business requires the application of certain restrictions and regulations in relation to it.
Combination of factors of production.
In an effort to increase the profitability of resources, the entrepreneur resorts to the most rational ways their application. The most obvious form of increasing the efficiency of disposable resources is to move them to markets where their alternative value is greater and they will bring more income. This activity is called arbitration. Arbitration is easy to spot in trading and exchange activities. With all the differences in the forms of manifestation, it is characterized by: a) the use of non-equilibrium market situations as a source of new opportunities; b) the desire to rationalize the distribution of resources as a source of additional income; c) assistance in establishing market equilibrium through the redistribution of benefits. The movement of resources in order to use them more efficiently is only general formula a more complex process of increasing the efficiency of resource use. Another, more complex in terms of content, form of increasing the efficiency of resource use is the combination of production factors. Its essence lies in the search for the most rational variant of the combination of factors by replacing one factor with another. By varying the factors of production, the entrepreneur not only ensures the transition to a more efficient use of the resource, but also, manifesting in new technologies, ensures the progressive course of social productive forces. In the process of industrialization of the economy, the combination based on the "principle of substitution" becomes a determining factor in generating income, and the "spirit of rationalism" permeates the entire content of entrepreneurship and is identified with it.
Innovation.
Dealing with uncertainty requires the entrepreneur to be creative and creative approach... Innovation is practical use fundamentally new goods, technologies, new forms of organization of production and sales, the very forms of organization of entrepreneurial activity. As a form of manifestation of the creative potential of an individual, innovation, of course, is associated with the human factor. However, no matter how much the propensity to innovate depends on personality traits individuals as a phenomenon economic life innovation is nevertheless determined by the nature of the entrepreneurial activity. An inventor is not yet an innovator. He becomes such only when he realizes himself as an entrepreneur, that is, a person fighting for top scores management. It is in this that innovation is the dominant cement. First, the market uncertainty that hinders the entrepreneur's success pushes him to look for ways to change the market situation itself in a direction favorable to him, which is possible only through innovative activities. Secondly, the desire to extract the greatest possible entrepreneurial income can be realized only by acquiring some market advantages as a result of innovations. Therefore, in the economic sense, the real source of innovation is competition between entrepreneurs, “competition generated by a new product, new technology, a new source of supply, a new type of organization ”.
The innovative nature of entrepreneurship forces us to consider it as an extremely active factor in scientific and technological progress and driving force economic growth. On the other hand, a change in views on the role of entrepreneurship in the economic process led to a revision of ideas about the nature of the process itself. economic development... It appears not in the form of a progressive evolutionary process of economic growth, but a spasmodic dynamic development, alternating with periods of upsurge and depression.
The only thing that prevents us from reaching the limit of our capabilities is our own thoughts. We are our own worst enemies.
Usually, the process is figuratively represented as a leisurely climb up the stairs, step by step. In fact, it consists of jumps and is more like jumping between floors on a trampoline. In my life, such leaps occur due to changes in the very way of thinking: I look back and evaluate the whole picture as a whole, change my attitude towards something. By the way, such moments do not happen often, they are scattered over time.
To cope with the flood of information and external stimuli that befall our brains, we unconsciously begin to think stereotyped and use heuristic, intuitive methods for solving problems.
Writer Ash Read has likened the heuristic to a bike path for the mind, which allows it to work without maneuvering between cars and without risk of getting hit. Unfortunately, most of what we think we take fully deliberately are in fact taken unconsciously.
The big problem is that we think in accordance with heuristic patterns when faced with important choice... Although in this situation, on the contrary, deep thought is required.
The most harmful heuristics are those that prevent us from seeing the path to change. They change our perception of reality and push us to climb the stairs for a long time when we need a springboard. Here's a list of five cognitive biases that kill your resolve. Overcoming them is the first step towards change.
1. Confirmation bias
pressmaster / Depositphotos.comOnly in an ideal world are all our thoughts rational, logical and impartial. In reality, most of us believe what we want to believe.
You can call it stubbornness, but psychologists have another term for this phenomenon - confirmation bias. It is the tendency to seek and interpret information in a way that confirms an idea that is close to you.
Let's give an example. In the 1960s, Dr. Peter Wason conducted an experiment in which subjects were shown three numbers and asked to guess a rule known to the experimenter to explain the sequence. These were the numbers 2, 4, 6, so the subjects often suggested the rule “each next number increases by two. " To confirm the rule, they offered their own sequences of numbers, for example 6, 8, 10 or 31, 33, 35. Is everything correct?
Not really. Only one in five test subjects guessed about the real rule: three numbers in order of increasing values. Typically, Wason's students came up with a false idea (add two each time), and then only searched in that direction to get evidence to support their assumption.
Despite its apparent simplicity, Wason's experiment says a lot about human nature: we tend to seek only information that confirms our beliefs, and not the one that refutes them.
Confirmation bias is inherent in everyone, including doctors, politicians, people creative professions and entrepreneurs, even when the cost of a mistake is particularly high. Instead of asking ourselves what we are doing and why (this is the most important question), we often fall into bias and rely too heavily on initial judgment.
2. Anchor effect
The first solution is not always the best, but our minds cling to the initial information that literally takes hold of us.
The anchor effect, or anchoring effect, is the tendency to greatly overestimate the first impression (anchor information) when making a decision. This is clearly manifested when evaluating numerical values: the estimate is inclined towards the initial approximation. Simply put, we always think in relation to something, not objectively.
Research shows that the anchor effect can explain anything, from why you don't get what you want (if you ask for more in the first place, the final figure will be high, and vice versa) to why you believe in stereotypes about people. that you see for the first time in your life.
Revealing research by psychologists Mussweiler and Strack, who demonstrated that the anchoring effect works even with initially implausible numbers. The participants in their experiment, divided into two groups, were asked to answer the question of how old Mahatma Gandhi was when he died. And at the beginning, as anchors, we asked each group an additional question. The first: "Did he die before the age of nine or after?" As a result, the first group suggested that Gandhi died at 50, and the second at 67 (in fact, he died at the age of 87).
The anchor question with the number 9 forced the first group to name a significantly lower number than the second group, which was based on a deliberately high number.
It is extremely important to understand the meaning of the initial information (whether it is plausible or not) before making a final decision. After all, the first information that we learn about something will affect how we will relate to it in the future.
3. The effect of joining the majority
chaoss / Depositphotos.com The choice of the majority directly affects our thinking, even if it contradicts our personal beliefs. This effect is known as herd instinct. You have probably heard sayings like “They don’t go to a strange monastery with their own charter” or “In Rome, act like a Roman” - this is exactly the effect of joining.
This distortion can push us to accept not the most good decisions(for example, go to a bad but popular movie or eat at a questionable place). And in the worst case, it leads to groupthink.
Groupthink is a phenomenon that arises in a group of people, within which conformism or the desire for social harmony leads to the suppression of all alternative opinions.
As a result, the group isolates itself from external influence... Suddenly, diverging views becomes dangerous, and we begin to be our own censors. And as a result, we lose our own and independence of thinking.
4. Survivor's mistake
Often we go to one more extreme: we focus exclusively on the stories of people who have achieved success. We are inspired by the success of Michael Jordan, not Kwame Brown or Jonathan Bender. We praise Steve Jobs and forget about Gary Kildall.
The problem with this effect is that we focus on 0.0001% successful people rather than most. This leads to a one-sided assessment of the situation.
For example, we may think that being an entrepreneur is easy because only successful people publish books about their business. But we don't know anything about those who failed. This is probably why all kinds of online gurus and experts have become so popular, promising to open "the only way to success." You just need to remember that the path that worked once will not necessarily lead you to the same result.
5. Loss aversion
After we have made a choice and walk our path, other cognitive distortions come into play. Probably the worst of these is loss aversion, or the effect of ownership.
The loss aversion effect was popularized by psychologists Daniel Kahneman and Amos Tversky, who found that we would rather avoid even a small loss than focus on the benefits we can get.
The fear of a small loss can keep a person from participating in the game, even if a fabulous win is possible. Kahneman and Tversky conducted an experiment with the most ordinary mug. People who did not have it were willing to pay about $ 3.30 for it, and those who did have it were willing to part with it for only $ 7.
Think about how this effect might affect you, if you are. Are you afraid to think outside the box for fear of losing something? Does fear outweigh what you can gain?
So the problem is there. Where is the solution?
All cognitive biases have one thing in common: they appear due to the unwillingness to take a step back and look at the whole picture as a whole.
We prefer to work with something familiar and do not want to look for miscalculations in our plans. V positive thinking has its advantages. But, if you make important decisions blindly, you are unlikely to make the best choice of the possible.
Before making a serious decision, make sure you are not a victim of cognitive biases. To do this, take a step back and ask yourself:
- Why do you think you need to do this?
- Are there any counterarguments to your opinion? Are they wealthy?
- Who influences your beliefs?
- Are you following other people's opinions because you truly believe in them?
- What will you lose if you make such a decision? What will you get?
There are literally hundreds of different cognitive biases, and without them our brains simply could not function. But, if you do not analyze why you think this way and not otherwise, it is easy to fall into stereotyped thinking and forget how to think for yourself.
Personal growth is never easy. It is hard work to which you must devote your entire self. Don't let your future get hurt just because it’s easier not to think.