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DEMAND THRESHOLD, ZERO EXPENDITURE AND HIERARCHICAL MODEL OF CONSUMER DEMAND
Author(s) -
Chattopadhyay Nachiketa,
Majumder Amita,
Coondoo Dipankor
Publication year - 2009
Publication title -
metroeconomica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.256
H-Index - 29
eISSN - 1467-999X
pISSN - 0026-1386
DOI - 10.1111/j.1467-999x.2008.00323.x
Subject(s) - consumption (sociology) , consumer expenditure , economics , preference , zero (linguistics) , consumer demand , microeconomics , brand preference , consumer expenditure survey , revealed preference , econometrics , class (philosophy) , phenomenon , hierarchical database model , public economics , advertising , business , computer science , aggregate expenditure , social science , linguistics , philosophy , physics , brand awareness , quantum mechanics , artificial intelligence , sociology , data mining
Consumer expenditure surveys often show households reporting zero consumption of some commodities. Three reasons for this are recognized in the literature: (i) infrequency of purchase, (ii) a strong brand preference for differentiated products and (iii) misreporting. However, sometimes the number of households reporting zero consumption is seen to decline with income. To capture this phenomenon, which does not fall into any of the categories mentioned above, we propose a hierarchical preference structure and identify a class of recursive utility functions representing this structure. An empirical illustration based on Indian consumer expenditure data is provided.