Why Consumers Purchase Goods or Services in the Informal Economy?

Consumption Behavior
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Anneke Zwart
Student (University), Netherlands
Williams and Martinez-Perez (2014) review research about customer behavior in the informal economy. The informal economy is that part of the economy not regulated, monitored or taxed by the state. As a result, income obtained in the informal economy is not included in the Gross National Product (GNP) of countries. Other maybe more familiarly terms of the informal economy are: the black market or the shadow market. In their study they describe the possible reasons for consumers to participate in the informal economy: 1. Financial Gain: consumers could be rational persons that weigh up the benefits versus the costs and risks of purchasing a good in the informal economy. If the financial benefits of purchasing a good in the informal economy exceeds the costs of their actions and of disregarding rules, a rational consumer will purchase the good or service in the informal economy. 2. Social/redistributive reason: An alternative view does not see consumers as rational but rath (...) Read more? Sign up for free

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Consumption Behaviour in Underground Economy / Shadow Economy

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