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Pellandini-Simányi_2024-OUP_J consum research_The Market Dynamics of Collective
Journal article

The market dynamics of collective ignorance and spiraling risk

  • 2024
Published in:
  • Journal of consumer research. - 2024, vol. 51, no. 4, p. 698-718
Social construction of risk
Personal finance
Regulatory failure
Risk competition
Market system dynamics
English In some markets, offerings become riskier over time as producers introduce new versions that are made more affordable by increasing their risk. Existing theories suggest consumers adopt riskier versions either because they become more risk tolerant or they trade higher risk for lower price—both of which presume consumers know the risks. We reveal a third explanation: evolving market dynamics that increasingly encourage consumer inattention to risk and produce “collective ignorance.” We identify factors of collective inattention and propose a three-stage model of development of collective ignorance by analyzing the case of risk buildup in the Hungarian mortgage market. Data include archival materials and interviews with borrowers, lenders, and regulators. Initially, producers offer low-risk products, and social, cultural, and institutional factors encourage attention to risk. Consumers attentive to and capable of assessing risk become early adopters. Over time, increasing adoption and changes in market factors divert consumers’ attention from risk, shifting it to price. Under insufficient regulation, risk escalates: producers repeatedly cut price by offering increasingly risky products, while rising collective ignorance leads even risk-averse consumers to adopt them. We offer theoretical contributions to research on the social construction of risk, the attitude–behavior gap, and neoliberal responsibilization.
Collections
Language
  • English
Classification
Economics
License
CC BY
Open access status
hybrid
Identifiers
Persistent URL
https://n2t.net/ark:/12658/srd1330443
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