ANALYSIS OF DEMAND AND INTERPERSONAL EFFECTS
RIZZA MAY CASTRO BERTULFO
SUBMITTED TO THE FACULTY OF THE DEPARTMENT OF ECONOMICS COLLEGE OF ECONOMICS AND MANAGENENT
UNIVERSITY OF THE PHILIPPINES LOS BAÑOS IN PARTIAL FULFILLMENT OF THE
REQUIREMENTS FOR THE DEGREE OF
BACHELOR OF SCIENCE IN ECONOMICS
APRIL 2009
v ABSTRACT
BERTULFO, RIZZA MAY CASTRO. University of the Philippines Los Baños.
ANALYSIS OF DEMAND AND INTERPERSONAL EFFECTS. April 2009.
(Undergraduate Thesis)
Adviser: Mr. Robert Dominick E. Mariano
This study tried to examine factors affecting demand other than price and income.
Specifically, it evaluated interpersonal effects in demand such as the bandwagon and the snob effects. The study applied Leibenstein’s (1950) gedanken experiment and employed the fashion market to capture and verify if the said effects exist in the study market. The experiment utilized the market for flipflops as the subject area of demand with 35 respondents. It analyzed how other people’s demands affect an individual’s own demand through a series of experimental rounds. The initial round was basic; it asked how many an individual is willing to buy given different price levels. The subsequent rounds were more complex in the sense that it asked individuals how many they are willing to buy given existing quantities demanded by the market. The study also tried to analyze different socio-demographic factors affecting demand and if the said factors were to affect interpersonal effects.
Based on the results, there was a decrease in the market demand over time which indicated the existence of snob effects in the flipflops market. The Friedman test was used to statistically verify this existence and it was statistically proven to exist at low price levels (100, 150, 200, 250 and 500). In the analysis of socio-demographic factors, trends in the demand across age, gender, monthly disposable allowance, and level of social integration were utilized. It was observed that if the respondent was a woman;
belonged to the 20 and above age group; or is strongly integrated in society, the respondent is observed to have a higher quantity demanded as compared to those who are not. These findings conform with the hypothesis. However, the results for the monthly disposable allowance contrasted the hypothesis that individuals with higher allowances tend to demand more. The experiment result proved otherwise in this case.
vi
TABLE OF CONTENTS
TITLE PAGE i
ACCEPTANCE SHEET ii
BIOGRAPHICAL SKETCH iii
ACKNOWLEDGMENT iv
ABSTRACT v
LIST OF TABLES viii
LIST OF FIGURES ix
LIST OF APPENDICES x
CHAPTER I: INTRODUCTION 1
A. Background of the Study 1
B. Statement of the Problem 4
C. Significance of the Study 5
D. Objectives of the Study 6
CHAPTER II: REVIEW OF RELATED LITERATURE 7
A. Consumer Theory 7
B. Behavioral Models in Consumer Behavior 8
C. Fashion 9
D. Other Factors Affecting Demand 10
1. Social Factors 10
2. Age 11
3. Interpersonal Effects in Demand 11
Bandwagon Effect 12
Snob Effect 13
E. Existence of Bandwagon Effect 13
CHAPTER III: METHODOLOGY 16
A. Theoretical/Conceptual Framework 16
1. Bandwagon Effect 16
2. Snob Effect 18
B. Leibenstein’s Gedanken Experiment 20
C. Data Collection 21
D. Survey-Experiment 21
E. Data Analysis 23
1. Level of Social Integration (Index) 23
2. Friedman Test 25
CHAPTER IV: RESULTS AND DISCUSSION 28
vii
A. Preliminary Analysis 28
1. Socio-demographic Profile of the Respondents 28
2. Perception for Fashion 28
3. Level of Social Integration 32
B. Socio-demographic Factors Analysis 35
1. Age 35
2. Gender 37
3. Monthly disposable allowance 38
4. Level of Social Integration 39
C. Demand Schedules from Rounds 1 to 10 40
D. Friedman Test 42
E. Trend Analysis per Price Level 44
CHAPTER V: SUMMARY AND CONCLUSIONS 48 CHAPTER VI: LIMITATIONS AND RECOMMENDATIONS 50
REFERENCES 52
APPENDICES 54
viii
LIST OF TABLES
Table 1. Levels of Social Integration 25
Table 2. The Total Quantity demanded according to Age Groups 35 at each Price Level
Table 3. The Total Quantity demanded according to Gender 37 at each Price Level
Table 4. The Total Quantity demanded according to Allowance Groups 38 at each Price Level
Table 5. The Quantities Demanded at each Price Level Per Round 41 Table 6. Test-statistic and Corresponding Interpretation at each Price Level 43
ix
LIST OF FIGURES
Figure 1. The Bandwagon Effect 17
Figure 2. The Snob Effect 19
Figure 3. Composition of the Respondents by Gender 30
Figure 4. Composition of the Respondents by Age 31
Figure 5. Respondents’ Perception of Fondness for Fashion 31 Figure 6. Respondents’ Perception for Being Fashionable 32 Figure 7. Level of Social Integration of the Respondents 33 Figure 8. Graphical Behavior of the Quantity Demanded by the Two Age Groups 36 Figure 9. The Relationship of Social Integration Level 39
With Total Quantity Demanded
Figure 10. The Demand Curves for the Different Rounds 42 Figure 11. Trends in the Demand for Low-priced Flipflops 44 Figure 12. The total quantity demanded for a P500-flipflops in each round 45 Figure 13. Trends in the Demand for High-priced Flipflops 46 Figure 14. The total quantity demanded for a P1200-flipflops in each round 47
x
LIST OF APPENDICES
Appendix A. Survey Questionnaire 55
Appendix B. Survey-experiment Questionnaires 61
