Consumer X-inefficiency and the problem of market regulation

Earl, Peter E. (2007). Consumer X-inefficiency and the problem of market regulation. In Roger Frantz (Ed.), Renaissance in Behavioral Economics: Essays in Memory of Harvey Leibenstein (pp. 176-193) New York, NY, U.S.A.: Routledge. doi:10.4324/9780203020876

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Author Earl, Peter E.
Title of chapter Consumer X-inefficiency and the problem of market regulation
Title of book Renaissance in Behavioral Economics: Essays in Memory of Harvey Leibenstein
Place of Publication New York, NY, U.S.A.
Publisher Routledge
Publication Year 2007
Sub-type Research book chapter (original research)
DOI 10.4324/9780203020876
ISBN 9780203020876
Editor Roger Frantz
Chapter number 9
Start page 176
End page 193
Total pages 234
Total chapters 11
Collection year 2008
Language eng
Subjects 340210 Welfare Economics
340101 Microeconomic Theory
Formatted Abstract/Summary
Although most scholars regard Harvey Leibenstein's main contribution to consumer theory to be his 1950 article that reconciled Veblen's institutionalist theory of fashion with the axiomatic neoclassical microeconomics, this paper's argues that his work on X-inefficiency is likely to be more significant to consumer researchers in future. Its basic proposition is very straightforward: whereas X-inefficient firms achieve lower productivity than they might have been able to achieve, X-inefficient consumers pay more to meet their goals, or to obtain particular bundles of consumption characteristics, than they needed to do, or they fail to meet goals they could have achieved had they used their resources differently. In both cases, the extent of X-inefficiency may be affected by competitive pressures and by the regulatory context in which decisions are taken. After arguing that the sources of consumption X-inefficiency are analogous to those that Leibenstein (1976) posited as causes of X-inefficiency in organizations, the paper examines in general terms the kinds of markets in which consumption X-inefficiency is likely to be rife and explores regulatory policies that might reduce it. This is followed by a case study analysis of the market for housing renovation products and services and a discussion of some of the distributional issues that arise from attempts to reduce X-inefficiency.
© 2007 Editorial matter and selection, Roger Frantz; individual chapters, the contributors
Keyword X-inefficiency
Behavioural economics
Real estate renovation
Consumer policy
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Document type: Book Chapter
Collection: School of Economics Publications
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Created: Tue, 29 Nov 2005, 10:00:00 EST by Peter E. Earl on behalf of School of Economics