UPDATE 2: I uploaded the new version that includes the 3 missing articles! So now it should contain all required literature for the exam. Good luck with studying!
UPDATE: I just noticed that there were 3 articles added to the literature list recently. I have not noticed this change, and therefor...
It feels more like the readings were copied and pasted into the document, rather than properly summarized. It's hard to review the articles for exam; not worth the price.
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Literature Summary Consumer and Economic Psychology
LITERATURE SUMMARY
PSB3E-SP06 CONSUMER AND ECONOMIC PSYCHOLOGY
2022-2023
VERSION 2
,Literature Summary Consumer and Economic Psychology
WEEK 1
CHAPTER 1 – CONSUMER PSYCHOLOGY (JANSSON -BOYD)
Consumer Psychology is about understanding why and how individuals and groups engage in consumer
activities, as well as how they are affected by them. A large part of this discipline is focused on the cognitive
processes and behaviour involved when people purchase and use products and services.
Scientific studies are very useful in that they can be used to explain concepts that consumers are unable to
express in words, such as how a particular point-of-purchase display affected them when shopping in a
supermarket, or whether or not they are influenced by television commercials.
In everyday life, people are repeatedly exposed to different aspects of consumption. Almost all behaviours that
humans engage in are directly or indirectly linked to consumption. Hence, without studying how consumption
affects individuals and groups, one can never truly say that we understand humans.
A number of research studies conducted by psychologists have repeatedly shown that consumption is an
integral part of people’s lives. For example, it has been found that consumer activities can impact upon
people’s identities and how individuals convey their social status through the use of certain products and
services. People’s opinions, values and beliefs about others are often moulded by what they are exposed to by
the media. For example, television commercials can affect the way people view others. Naturally, media
exposure (and in particular advertising) also influences how consumers view particular products and services
and whether or not they will purchase them.
According to historians, the culture of consumption in Europe started before the Industrial Revolution. In the
1800s, the Industrial Revolution spread throughout Europe and the USA. Fundamental changes occurred in
transportation, metal manufacture, textile, and agriculture as well as in the social structure. This meant that
there was an increase in food supplies and raw materials and the new and more efficient technology that
emerged made it possible to increase the overall production levels of many products. In parallel with the
continuous consumption growth, many scientists realized that it is important to understand how the consumer
society affects individuals, in order to truly understand human beings.
With the increase in production, competition was fierce between manufacturers and hence the pressure was
on to promote the available products. Consequently, during the 1840s a man called Volney Palmer opened the
first advertising agency in the world. Also, with a wider range of products now more easily available, it was
thought that shopping could be made more convenient for the customer. It was thought that bigger shops
where most kind of things could be bought would simplify the shopping experience for consumers.
It was also during this period that the world’s first experimental psychology laboratory was established. It was
set up in Leipzig in 1879 by a German psychologist named Wilhelm Wundt. He was one of the founders of the
first major school of thought in psychology – structuralism. Structuralism focused on understanding the
structure of the mind and Wundt believed that psychologists should focus on immediate conscious experience.
Throughout his career he investigated many different areas of psychology, but attention may be the most
relevant area to Consumer Psychology. Wundt viewed attention as the part of perception that reflects what
humans are consciously aware of.
In the late 1800s scientists started to realize that material possessions play an important role in people’s lives.
William James believed that individuals’ self-concept would partially be dependent upon owning the right kind
of possessions.
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,Literature Summary Consumer and Economic Psychology
With the advertising industry growing rapidly, a string of academics also became interested in the subject area.
Harlow Gale is considered to be the founder of the psychology of advertising, as he was the first to conduct
experiments on the effects of advertising.
During the early years of studying advertising, experimental psychologists affirmed previous theories that
consumers were non-rational individuals who were easily influenced. Walter Dill Scott, a student of Wundt,
believed that sentimentality, emotions and sympathy all made consumers more open to suggestions made by
advertisers.
The manufacturing process was to become a lot easier and quicker when Henry Ford, the owner of Ford
Motors Company, invented the assembly line in 1913. The assembly line ensured that all sorts of products
could be produced relatively cheaply in their hundreds, thousands and eventually millions. With the rapid
growth in manufacturing practices, competition between products and brands became even fiercer and now
more than ever producers needed advertisers to help ensure that their products would sell. When Ford
invented the assembly line, he undoubtedly helped establish the consumer society in which we live today.
Politicians also became interested in the applications of advertising when they realized that ‘how to sell
products’ could be applied to sell their own ideas. This was particularly evident during World War I when
propaganda campaigns were used as tools to encourage people to continue fighting.
In the 1920s a number of things happened that contributed significantly to the development of the consumer
society in which we live today. In 1920, the first American radio station started broadcasting. The automobile
became increasingly common, especially in the USA, and consequently new service institutions such as drive-in
restaurants were created. Additionally, mail-order catalogues became a great success during the 1920s and the
market was flooded with new products such as washing machines, toasters and irons.
The founder of behaviourism, John B. Watson was the first prominent psychologist to apply psychological
methods to advertising. He believed that individuals could be conditioned into being anything, and if humans
could be made into whatever he desired, surely it would not be difficult to get them to buy specific products
and brands. Hence, in 1920, he joined America’s largest advertising agency.
Another psychologist who also contributed to the understanding of advertising was Nixon. His research mainly
focused on the links between attention and advertising. Initial studies of tracking eye movements can be
attributed to H.K. Nixon (1924) as he was trying to establish what part of an advertisement consumers look at.
To test this, he hid behind a curtain and carefully observed the eye movements of individuals while they were
reading. From his studies he came to conclude that pictures used in print advertisements can guide consumer’s
attention to the text and that there was little attentional difference between colour and black and white ads.
In World War II, the Department of Agriculture in the US called upon the social psychologist Kurt Lewin to help
convince Americans to eat high protein foods such as hearts, kidneys and livers. With a food shortage
appearing inevitable, it was more important than ever to ensure that nothing edible and nutritious was wasted.
Lewin’s solution was to compare how to most effectively get housewives involved in wanting to eat intestinal
meats. He demonstrated that level of involvement could increase the likelihood of being persuaded.
After World War II consumption around the world gradually started picking up again and consequently a
renewed interest in advertising also emerged. Then a man called Ernest Dichter decided to introduce Freudian
concepts into the US advertising industry. Dichter was interested in understanding consumers’ unconscious
minds as he thought that consumer spending was reflected by their unconscious desires. It was also around
about this time that George Katona pioneered the use of how to apply survey research to consumer buying. He
found that when consumers felt confident, they were more willing to enter into new credit agreements.
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, Literature Summary Consumer and Economic Psychology
With World War II now part of history, governments around the world were looking at ways to strengthen their
economies. One obvious way of doing so was to increase consumer spending, so in the 1950s politicians were
busy promoting the benefits of living in a consumer society. This again led to an increase in advertising and this
was one of the reasons why a lot of research was conducted during the 1950s and 1960s on questions related
to attitudes and persuasion.
In 1960, Division 23 of the American Psychological Association was established. It was then called the
Consumer Psychology Division and it was only in 1988 that the name changed to The Society for Consumer
Psychology (which is its current name).
CHAPTER 1 – ECONOMIC PSYCHOLOGY
Economic psychology has an important contribution to provide economics with a realistic and insightful
understanding of human rationality in the economic domain.
Our description of economic psychology as the science of economic mental life and behaviour reflects a
contemporary approach to psychology, conferring equal status on the twin endeavours of understanding
mental life and understanding behaviour.
Economic psychology…
- …is a branch of applied psychology, recognized as such by the International Association of Applied
Psychology, in which both theory and application are central. This means that economic psychologists
take seriously the responsibility of providing the basis for research-informed policies to support
people’s economic well-being and the health of the economy;
- …is the study of ‘how individuals affect the economy and how the economy affects individuals’;
- …is an interdisciplinary endeavour.
The origins of economic psychology can be traced to Greek philosophers and, more recently, to seventeenth-
century economists who reflected on psychological matters, notably Adam Smith. Smith explored the concept
of self-love and the importance of being able to take others’ roles, as in the social interactions necessary for
trading. In addition, he claimed that happiness and well-being were derived from the happiness and well-being
of others, and explored several psychological concepts, including sympathy, emotions, and virtues in general.
Besides Adam Smith, other economists of the eighteenth and nineteenth centuries wrote about psychological
aspects of economic phenomena. Jeremy Bentham developed Smith’s concept of self-love and characterized
utility as the permanent hedonistic pursuit of pleasure and avoidance of pain, along with calculations to
maximize utility. John Stuart Mill conceived the still respected (among mainstream economists) model of the
homo economicus, a rational individual who makes rational decisions that maximize utility, is self-interested,
capable of learning from experience, and with stable, consistent preferences. W. Stanley Jevons derived
marginal utility theory from Mill’s model, while adding deductive mathematics to establish some basic
assumptions. Finally, in the 1870s, Karl Menger and his collaborators formed what became known as the
Austrian Psychological School, or the Marginalist School, that emphasized the importance of subjective
elements in the economy. They claimed that a psychological analysis ought to provide the foundation for
economics, arguing that introspection was the only method necessary to examine needs and attributions of
value.
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