Quarterly Journal of Economics Vol. 116 No. 1 2001
A Cue-Theory of Consumption
Abstract
Psychological experiments demonstrate that repeated pairings of a cue and a consumption good eventually create cue-based complementarities: the presence of the cue raises the marginal utility derived from consumption. In this paper, such dynamic preferences are embedded in a rational choice model. Behavior that arises from this model is characterized by endogenous cue sensitivities, costly cue-management, commitment, and cue-based spikes in impatience. The model is used to understand addictive/habit-forming behaviors and marketing. The model explains why preferences change rapidly from moment to moment, why temptations should sometimes be avoided, and how firms package and position goods.
- DOI
- 10.1162/003355301556356
- Volume
- 116
- Issue
- 1
- Pages
- 81-119
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref