An experimental study of consumer demand using rats

121 AN EXPERIMENTAL

STUDY OF CONSUMER DEMAND USING RATS

Mickey T.C. Wu and Dennis Monahan’

Much of what is labeled economics is currently unavailable for experimental testing. However, there is a current trend toward an experimental approach in the field of consumer demand. Most of these experiments have involved the use of laboratory animals (1, 3,4,5,6). The basic postulate of economics is rational choice. This implies that a human is able to define goals and to select methods in a rational manner to achieve these goals. For a consumer this implies that he is able to choose from among alternatives in such a manner as to achieve maximum satisfaction from consuming his selected commodity bundle. Within his consumption set could be goods or servicessuch as charity, love and compassion. Given this postulate, economic theory makes definite predictions about consumer behavior when prices and/or income changes. The first prediction is that of the negatively sloped demand curve. This implies that there is an inverse relationship between price and quantity demanded for a particular good, all other things constant. The prediction states that as the price of a good rises, all else constant, the quantity demanded of the good falls.

1 Mickey T.C. Wu is Assistant Professor of Economics at Coe CoUep, Cedar Rapids, Iowa and Dennis Monahan is a graduate student at the University of Kansas, Lawrence, Kansas. The authors would like to thank Rofessor William Spellman and Michael Morris for valuable suggestions.

122

Consumer demand theory also makes definite assumptions regarding the elasticities of price and income.* The income elasticity of a good represents the percentage change in the demand for a good, given a percentage change in income, all other things constant. A positive (negative) income elasticity implies that consumption and income are directly (inversely) related and hence the good is a normal (inferior) good. Economic theory predicts that not all goods can be inferior. Own-price elasticity represents the percentage change in commodity consumed given a percentage change in its own price, other things held constant. The cross-price elasticity of demand represents the percentage change in consumption for good one given a percentage change in the price of good two. When the ownprice elasticity coefficient is greater (less) than one it means that a percent change in the price will generate a greater (less) than one percent change in quantity demanded and hence demand for that good is termed elastic (inelastic). When the cross-price elasticity coefficient is greater (less) than zero, it means that a one percent

* Income elasticity defined as

Own-price elasticity =

--%AinXl % A in Income %AinXl %AinPXl

Cross-price elasticity =

Where X - any good PXl - the price of good #1 PX2 -the price of good #2

%AinXl -%AinPX2

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change in price of good two will generate an increase (decrease) in the demand for good one and thus good one and good two are considered substitutes (complements) although complementarity may appear for two essential goods. The predictions above allow an experimenter to test consumer demand predictions in a laboratory setting. If the observed behavior corresponds to consumer demand theory then we find support for these predictions of Modern Demand Theory. Some objections may be raised to the validity of inferring human consumer behavior from animal consumer behavior. However, it should be remembered that if the Darwinian theory of evolution holds true, then behavior between species does not change absolutely as we move from one species to another. The major advantage in using laboratory animals is that it allows the investigator to change economic parameters and structures in ways that may not be permissible had human subjects been used (3,4,5). The major hypothesis tested in this article is that there is an inverse relationship between the quantity demanded of the good and its own price. In all cases, the data obtained failed to contradict this hypothesis. I.

Apparatus and Procedure

Subjects: Four .white male albino rats with no previous experimental experience were used as subjects. All four rats were between the ages of 2-3 months when the experimental procedure began. Apparatus: The experiment was conducted in the Psychology Department laboratory at Coe College. A two bar skinner box was used as the experimental chamber. The box was twelve inches long

124

and ten inches wide with a depth of twelve inches. Two feeder cups were located at the lower, middle portion of the front wall, 3?4” from the side walls. The cups were a square 1%’wide by 3/4’ deep, and were connected to the pellet dispensers by rubber tubing. The two levers were located one inch from the side wall and one inch from the floor. Both bars were 1%” wide by ,/” wide. One Scientific Prototype Mfg. Corporation, model number 12700 pellet dispenser and one Ralph Berbrands pellet dispenser were used in the study. Both dispensers required 45 mg. Noyes food pellets for their correct operation. Two types of Noyes food pellets were used. Regular Noyes food pellets were used in one of the dispensers and Noyes sugar pellets were used in the other dispenser. A gravity water bottle projected through the ceiling in the middle of the experimental chamber. Each animal was kept in separate cages where food and water were administered daily. A computer was used to automatically record .data and keep track of session time (i.e., number of responses already given during session). Procedure: Each animal was placed on a 20% weight reduction program so the animals would be active during the experimental sessions. The subjects weights were allowed to increase as time progressed because they were not fully mature at the time the procedure began. When the subjects reached the target weight they were shaped to the two levers using regular 45 rng. Noyes food pellets. The animals were reinforced by the activation of one of the pellet dispensers. The subject activated the food dispenser by pressing the appropriate lever the required number of times. For example, if the subject pressed the left bar ten times (which was the required number of presses to activate either dispenser during the baseline period) the left pellet dispenser was activated causing it to dispense a pellet into the left feeder cup. One lever activated the regular pellet dispenser while the other lever activated the sugar pellet dispenser. The levers were switched every

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two weeks so the same dispenser was not activated by the same lever. This reduced the subjects behavior based solely on lever preference. Each day all four subjects were placed individually into the experimental chamber and were allowed to use their daily income. After each animal completed his daily session, the data was collected and the animal was retuned to its individual cage where it was fed enough to maintain its required body weight. The subjects’ weights were taken once every four days. This allowed the animals’weights to remain relatively constant. During the original baseline period (and all baseline periods that followed) the subjects were given 1000 lever presses that could be distributed in any way between the two levers. The 1000 presseswere considered income while the required number of lever presses necessary to obtain a pellet were considered price. The price level for the baseline periods was set at 10, which corresponds to one pellet for every ten presses.Therefore, the maximum number of reinforcements (pellets) that could be obtained was set at one hundred. Each experimental period was conducted so that the last ten days of the session showed little variability in the response ratios. Following each experimental conditions (i.e., one of the baseline parameters was changed) the subject was placed back on the baseline contingencies. This allowed inferences to be drawn from behavior that occurred only when the experimental conditions were in. operation, since only one variable (either price or income) was altered. Following the first baseline period, the first two subjects were given a 25 percent nominal income reduction. From 1000 to 750 presses, the price (number of presses) required to obtain a single pellet remained at ten for both levers.

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The last two subjects followed a different schedule of experimentation. Following the original baseline period, the price of sugar pellets was doubled to twenty while the price required to obtain a regular pellet remained the same. Like the preceding subjects, they were placed back on the baseline conditions until the second experimental period began. During the second experimental period, the price of sugar pellets increased to twenty-five presses per reinforcement while the price of a regular pellet remained at ten. Again, the subjects were placed back on the baseline contingencies following the experimental period. II.

Results and Discussion 3

For all subjects the income under baseline conditions was set at 1000 lever pressesand the price set at ten lever pressesfor each commodity. The observed results differ substantially for each subject. Subject 1 purchased a much greater number of sugar pellets (81.48)4, while Subject 2 purchased more regular food pellets (67.7). Following the baseline period, experimental session number 1 was imposed where a 25% nominal income reduction was given to the first two subjects. During the first experimental session, Subject 1 consumed about the same proportion of both types of food pellets, indicating that the pellets were viewed as normal goods. The income elasticity for regular pellets was relatively inelastic at .436, while sugar pellets were viewed as elastic at 1.14.

3

See Appendix for matching results.

4Au measures are given in mean daily purchases (under the original baselime period one hundred pellets were available for consumption (total income-price of commodities = lOOO/lO = 100). See Table 1 for the complete listing of mean consumptions.

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Thus, given income changes, Subject 1 appeared to have a preference for sugar pellets. For Subject 2, a complete reversal of behavior was observed. The subject increased the consumption of sugar pellets at the expense of regular pellets. From the basis of the results it could be argued that the sugar pellets were viewed as an inferior good. The sugar pellet income elasticity for Subject 2 was -1 .OS and for regular pellets it was highly elastic at 2.58. This indicated that for Subject 2 only a slight increase in income would bring a great increase in the consumption of regular pellets.’ However, at this point it should be stressedthat a number of factors enter into the picture in regards to drawing conclusions in conjunction with the original baseline period. Prior to the experimental sessions, the subjects were shaped to the two levers using only regular Noyes food pellets. The Subject 2’s swing of preference toward sugar pellets during the first experimental period should be regarded as a learning period for all the rats. The subjects had to learn that now there were two types of food pellets available. As the data represents, some subjects adjusted more rapidly than others. In all sessions, except the original baseline period, Subject 2 purchased a slightly higher proportion of sugar pellets than regular pellets. Following the first experimental session, both subjects were returned to the original baseline income contengencies. Although neither subject actually returned to its original baseline behavior, they both preferred sugar pellets to regular pellets during the second baseline period. The reasons the subjects failed to return to their baseline behavior are given above. However, it should be

5 See Table 2 for complete listing of elasticities.

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stressed that even for humans, preferences are continually changing. Subject 1 nearly returned to its baseline position but it still consumed slightly fewer sugar pellets than during the original baseline period (72.73 compared to 81.48). Both regular and sugar pellet income elasticities were considered elastic (see Table 2 for all elasticity figures). The regular pellet income elasticity was 1.75 and the sugar pellet elasticity was 0.75. Since both were positive, the commodities were again considered normal. Subject 2 consumed a slightly higher number of sugar pellets (51.72) than regular pellets (48.28), with the regular pellet income elasticity at 1.5 and the sugar pellet income elasticity at S83. Thus, the subject viewed both goods as normal goods. For Subjects 3 & 4 a different experimental procedure was imposed. Instead of using income changes, the experimenter manipulated the prices of the two goods, increasing the price of the good which was preferred during the preceding baseline period. During the original baseline, both subjects consumed more sugar pellets indicating that they were considered superior to regular pellets. Subject 3 expended almost all of his income on sugar pellets (97.15) while Subject 4 used 67.9 of his 1000 lever presseson sugar pellets. Following the origina.l baseline period, sugar pellet prices were raised to twenty lever presses, up from the, ten presses required during the baseline period. Regular pellet prices remained at ten lever presses throughout the experiment. For Subject 3, sugar pellet consumption dropped from 97.15 pellets during the original baseline period to 42.26 sugar pellets during the experimental price change. This indicated that the two goods are substitutes for each other. As the price of sugar pellets rose, the subject consumed more and more regular pellets. This is shown in the own-price elasticity of demand, which was 2.72. Thus for Subject 3 we can conclude that its demand curve for sugar pellets has a

129

negative slope. For Subject 4, a less dramatic consumption occurred, but still more regular pellets were consumed during the price change than during the original base-line period. Subject 4 also viewed both goods as substitutes. The cross-price elasticity for regular pellets was .87 which was relatively inelastic but positive indicating that as the price of sugar pellets rose, more regular pellets were purchased. The sugar pellet price elasticity was found to be a -.72 which was also inelastic but negative, showing that fewer sugar pellets were consumed as their price increased. Returning the subjects to the baseline parameters caused a shift in behavior back to that observed during the original baseline. Although for Subject 3 the observed behavior was less dramatic than during the original baseline period, more sugar pellets were again consumed showing once again that the subject views the goods as substitutes. The price elasticity for sugar pellets during this period was -.686 and the cross-price elasticity for regular pellets was .831. This, again, shows that as the price of sugar pellets falls, more and more sugar pellets are consumed. For Subject 4, 76.89 sugar pellets were consumed with a price elasticity of -.893, while 23 .l 1 regular pellets were consumed with a crossprice elasticity of 1.298. Thus, like Subject 3, sugar pellets were consumed in greater proportions as their price was lowered. Here, sugar pellets and regular pellets are again viewed as substitutes. Following the second baseline period Subjects 3 and 4 were again given an increase in the price of sugar pellets. The price of a sugar pellet was set at twenty-five lever presses,five more than during the previous price change period. The observed behavior was more dramatic than before with even less sugar pellets being consumed than during the previous price change period. Subject 3 consumed 3 3.95 sugar pellets, with a price elasticity of -.769, and 66.05 regular pellets, with a cross-price elasticity of .788.

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Again the subjects viewed both goods as substitutes. During this session, Subjects 3 and 4 consumed their lowest proportion of sugar pellets which follows Modern Consumer Demand Theory because at this point sugar pellets were at their highest price. Subject 4 consumed 9.4 sugar pellets, with a price elasticity of -1.825, and 90.6 regular pellets with a cross-price elasticity of 1.385. Both elasticities were elastic, indicating that a 1 percent change in the price of a commodity was followed by a greater than 1 percent change in his consumption. When the price of sugar pellets was at twenty-five lever presses, Subject 4 spent almost all of his income on regular pellets. This showed complete substitutability of both goods given the indicated price change. Again, regular and sugar pellets are viewed as normal goods with consumption varying inversely with price. The final baseline session indicated that Subjects 3 and 4 returned to the preceding baseline behaviors, consuming more sugar pellets than regular pellets. Subject 3 consumed 72.68 sugar pellets and 27.32 regular pellets, almost exactly the same as in baseline condition Number 2. The sugar pellet price elasticity was 0.848 and the cross-price elasticity for regular pellets was .968, both were inelastic. This again shows that as the price of sugar pellets decreases,more and more sugar pellets are substituted for regular pellets. Subject 4 consumed an extreme amount of sugar pellets which was almost exactly opposite of what occurred during the previous experimental period. The subject consumed 95.75 sugar pellets, with a price elasticity of -1.916 (which was extremely elastic for these experimental findings), and 4.25 regular pellets with a cross-price elasticity of 2.124. Again extreme substitutability is observed with the given price change from twenty-five lever presses for a single sugar pellet to ten lever pressesper sugar pellet. Both subjects view both goods as normal commodities.

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It is interesting to note that the rats were placed in a situation in which they did not have to work (press the levers) in order to survive since their body weight was maintained at all times. Thus the rats were placed in some sort of a welfare state situation where it would be possible to survive without having to work. Given this, they still responded to incentives, i.e., work (press levers) in order to obtain more. A behaviorist could infer from this that incentives do matter and that they do change behavior. The results obtained from this study are interesting in that they do not contradict any of the predictions of Modem Demand Theory. In the case of rats No. 1 and No. 2, regular pellets and sugar pellets were considered to be normal goods.‘j For rats No. 3 and No. 4 the data suggeststhat the demand for the given goods varies inversely with own-price and that both goods are substitutes for each other.

zzz. Conclusion The findings of this study are in no way intended to present conclusive evidence in favor of Modem Demand Theory. However, we are encouraged in the sense that our findings supported those of previous studies (1, 3, 4, 5, 6). Although our experimental techniques were simple, it should be noted that the results failed to contradict any of the predictions derived from demand theory. Further experimentation would shed more light on consumer behavior.

‘In the initial experimental period rat No. 2 viewed regular pellets to be a normal good and sugar pellets to be aa inferior god. This supports the proposition that in P twogood world, at least one pod must be normal.

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Teble

Session

2

3

I

Bcguler Pellets Suger Pellets

18.52 81.48

61.70 32.3

3.05 97.15

32.1 67.9

#I (El) Peguler Pellet8 Sugu Pellets

16.35 58.65

31.23 43.77

57.75 42.26

58.37 41.63

Regulu Pellet8 Super Pellets

27.27 72.73

48.20 51.72

32.69 67.31

23.11 76.89

66.05 33.95

90.6 9.4

27.32 72.68

4.25 95.15

#2 (B2)

Experimentel

Benelinc

1 bl (Bl)

trperimentel

Bemeliac

of Both

Subjects

Comwditp

Period Beseline

Showing the Hcen Consumption Beplrr end suger Pellets

Sesmioe #2 (E2) Reguler Pellets Suger Pellets

C3 (B3) Reguler Pellets Suger Pelleta

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TABLE 2

Table

of

Elasticities 1

2

4

3

81 to El Regular Sugu

Pellets Pellets

A36

2.50

2.72

.a7

1.14

-1.05

-1.18

-.614

1.75

1.5

0.75

.503

El to 82 Reguler Pallets sugu Pelletr

.a31

1.298

-.686

-.a93

Regular Pellet* Sugar Pallets

.70a -.769

1.38 -1.825

Repler

.968 -.05

2.124 -1.916

B2 to E2

E2 to B3 Sugu

Pellets Pellets

NOTE : PorSubjectr

1 6 2 the elasticiry the Inco~c Elesticity of Demend. Income Elasticity

-

figure

given

where :

Ql-Q,

For Subject1 3 6 4 the clesticity figure given the price elasticity for the suger pelleta. Own-Price

Plasticity

-

9,-Q,

P1+P2

(-1p1'pz For

using

Subjects 3 6 4 the Kepler the croes-price eluticity Croes-Price

where:

Elerticity

Q rpl

- quantity

P

- price

l Pl

ebove vu

determined

Q - quantity I-income

above vu

whue:

by wing

conrmed

datcrmiaad

by wing

P - Rice

= -Ql+Q2

Pellet of

l lesticity

given

above yes determined

by

demand.

=

of regulu of surer

pellets

pelletr during

comumd

the firer

in the first

period

period

134

APPENDIX

Traditionally psychologist and economist have used different ways to study the behavior of individuals involved in alternative choice situations. Economists have looked to past situations to make predictions about the future, while experimental psychologists have manipulated one independent variable, in a controlled setting, and observed its effects on other dependent variables. While economists have used Consumer Demand Theory to predict the allocation of behavior between various alternative goods, psychologists have used the matching law (2) to predict the same behavior using different theoretical assumptions. The matching law states that a subject will match the response ratios to reinforcement). The matching law provides an accurate description of behavior in a wide variety of choice situations.

Responses on A Matching

Law = Responses on A

Responses +

Reinforvcments

on A

Reinforcements

on

on

B

A

Reinforcements +

OKI

B

OR RA+RB

ra+r b

An example of the matching law will allow us to examine its predictions. Suppose a rat is exposed to one-hour sessions of a concurrent FR2, FR4 reinforcement schedule. (FR2 schedule gives a reinforcement every two presses.) In our example, the rat presses both levers at an equal rate of thirty presses per minute but presses the FR2 lever for forty minutes and the FR4 lever for twenty minutes. This would result in 30 (presses per minute) x 40 (min.) = 1200 for the FR2 schedule and 30 (presses per minute) x

135

20 (min.) = 600 for the FR4 schedule the result is: RA RA+RB

=

1200 1200 + 600

=

‘a ‘a + ‘b

= - 2 2+1

= .67

Thus, the subject will press 67 percent of the time on the FR2 schedule. Table A shows the matching results of Subjects 3 and 4. The table compares the actual behavior observed during the experimental periods and the behavior predicted by the matching law. According to the law, both figures should be identical. Although the figures usually are not identical, they show stable relationships throughout the study. Thus, the matching law predicted which direction the behavior would change given a change in commodity price but it did not always predict the correct magnitude of the change.

136

TABLE A

Table Presenting the Matching Law Predictions for Subjects 3 & 4 Using Sugar Pellets Subject 3

Subject 4

Experimental No. 1 Matching law prediction Actual observed behavior

48.576 42.26

33.95 41.63

Experimental SessionNo. 2 Matching law prediction Actual observed behavior

26.92 33.95

21.836 9.4

137

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1.

Battalio, R.C., J .H. Kagel, H. Rachlin, and L. Green, “Commodity Choice Behavior with Pigeons as Subjects.” Journal of Political Economy, Vol. LXXXIV (February 1981), pp. 116-151.

2.

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3.

Kagel, J.H. and R.C. Winkler, “Behavioral Economics: Areas of Cooperative Research Between Economics and Applied Behavioral Analysis.” Journal of Applied Behavior Analysis, Vol. V (Fall 1972), pp. 33542.

4.

Kagel, J.H., R.C. Battaho, H. Rachlin, L. Green, R.L. Basman, and W.R. Kehnm, “Experimental Studies of Consumer Demand Behavior Using Laboratory Animals.” Economic Inquiry, Vol. XII (1975), pp. 22-38.

5.

Kagel, J .H., R.C. Battalio, H. Rachlin, and L. Green, “Consumer Demand Theory Applied to Choice Behavior of Rats.” In Limits to Action: The Allocation of Zndividual Bebavior, pp. 205336. Edited by J.E.R. Staddon. New York: Academic Press, 1980.

6.

Kagel, J .H., R.C. Battalio, H. Rachlin, and L. Green, “Demand Curves for Animal Consumer.” pUurte~ly Journal of Economics, Vol. XCVI (February 1971), pp. 1-17.

138

7.

Marascuilo, L.A. and M. McSweeney, Nonparametric Distribution-Free

Methods

for

and the Social Sciences,

Monterey, CA: Brooks/Cole, 1977. 8.

Monahan, D., “A Study of Consumer Demand Using Laboratory Animals.” Unpublished thesis, Coe College, 1981.

9.

Woodworth, S . , Experimental 1972.

Psychology,

Chicago : Holt ,