Contingent Behavior
Contingent behavior exists when each person's
actions depend on what he expects others to do. Its role is
obvious in our day-to-day behavior. The way a person going
to a party dresses will depend on how he expects others to
dress. People select the time and place they eat lunch on
expectations of when and where others will eat. The route a
person takes to work depends on what routes he expects
others to use. Students decide whether or not to cut a class
before a vacation based on how many other students they
expect to cut the class, and the amount they study for a
test is often based on how much they expect other people to
study.
The existence of unintended consequences in contingent
behavior is illustrated in the pictures below. In both
pictures, the behavior of the people involved depends on how
they see others acting. You should be able to see that in
the first picture below the end result will be that two
people keep hats on.
The only difference in the second picture is that one
person's instructions have changed. Although only one
instruction has changed, the actions of three people are
affected.
There is a multiplier effect in these pictures
that is the source of the unintended consequence. Changing
the instructions of one person changes the behavior of
three. When one person changes behavior, it may cause still
another to act differently, which in turn can cause still
another to act differently. Thus, a small initial change may
result in a large final change. The result can be unintended
because people act while ignoring the effect that their
behavior will have on the behavior of others.
The effects of contingent behavior seem commonplace in
our day-to-day activity--peer pressure is but one example of
it at work. However, economists have not spent much time
with it because it is not directly based on the favorite
assumption of economics, which is that behavior is based on
a self-interested weighing of costs and benefits. There is,
however, a good reason to develop
the idea a bit further because that development is an
easy way to introduce several ideas, such as equilibrium,
behavioral assumptions, and an adjustment process, which are
essential to understanding economic theory. The advantage of
meeting them here is that, as with most ideas, they will be
easier to understand when you see them in a variety of
contexts.
Copyright
Robert Schenk
|