Two Essays in Coping with Constraint
Resource constraint is a pervasive part of human life; people often face financial scarcity and time constraints. Recent research has distinguished two common types of planning that people enact to cope with resource constraints: efficiency planning saves resources by stretching the resource with the intention to achieve the same goal and avoid opportunity costs, while priority planning saves resources by making explicit tradeoffs between one’s goals. In my two-essay dissertation, I investigate the psychology underlying efficiency and priority planning, and propose ways in which budgeting impacts consumers’ responses to financial constraint.
In my first essay, I explore how budgeting helps consumers manage their constraints and achieve their financial goals. Budgeting consists of both setting a budget and tracking that budget. Budget setting increases the clarity of financial goals, which helps people react functionally to financial constraints. Budget tracking increases pain of paying, which has competing effects: it helps to control spending but also decreases the utility that people drive from spending money, making people less likely to want to continue tracking their budgets in later periods.
In my second essay, I explore consumer perceptions regarding why efficiency plans feel less costly than priority plans, yet require more time to enact. I suggest that this happens because efficiency plans involve tradeoffs across different resources (spending time to save money) whereas priority plans involve tradeoffs made within the same resource (forgoing a monetary purchase in favor of another monetary purchase). When people experience constraint in one resource domain, they focus heavily on that particular resource domain, and are less likely to consider opportunity costs associated with other resource domains, causing these cross-resource tradeoffs to feel less costly.