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Cumulative Utility and Consumer Theory

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  • Gilboa, Itzhak
  • Schmeidler, David

Abstract

This paper makes some preliminary steps towards a dynamic theory of consumer choices, restricted to the case of repeated small decisions. The authors assume that the consumer chooses among products, rather than among bundles, and that she bases her decision on a cumulative satisfaction index. The (instantaneous) utility of a product is closely related to the relative frequency with which it is consumed. The aggregation of choices among products implicitly defines a choice of a bundle. The authors propose to incorporate a product's price directly into its utility and show that it is consistent with balancing the consumer's budget. Copyright 1997 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

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Bibliographic Info

Article provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.

Volume (Year): 38 (1997)
Issue (Month): 4 (November)
Pages: 737-61

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Handle: RePEc:ier:iecrev:v:38:y:1997:i:4:p:737-61

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Cited by:
  1. Stefano Ficco & Vladimir Karamychev & Peran van Reeven, 2006. "A Theory of Procedurally Rational Choice: Optimization without Evaluation," Tinbergen Institute Discussion Papers 06-001/1, Tinbergen Institute.
  2. Wolfgang Ossadnik & Dirk Wilmsmann & Benedikt Niemann, 2013. "Experimental evidence on case-based decision theory," Theory and Decision, Springer, vol. 75(2), pages 211-232, August.
  3. Golosnoy, Vasyl & Okhrin, Yarema, 2008. "General uncertainty in portfolio selection: A case-based decision approach," Journal of Economic Behavior & Organization, Elsevier, vol. 67(3-4), pages 718-734, September.
  4. Stefano Ficco & Vladimir Karamychev & Peran van Reeven, 2006. "A Theory of Procedurally Rational Choice: Optimization without Evaluation," Tinbergen Institute Discussion Papers 06-001/1, Tinbergen Institute.
  5. Guerdjikova, Ani, 2006. "Portfolio Choice and Asset Prices in an Economy Populated by Case-Based Decision Makers," Working Papers 06-13, Cornell University, Center for Analytic Economics.

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