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Consumer behaviour: evolution of preferences and the search for novelty

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Author Info
Garcia-Torres, Abraham () (UNU-MERIT, Maastricht University)

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Abstract

Evolution of consumers' preferences has been recognized by many scholars as being key to understanding technological change. However, mainstream economics cannot account for the seemingly irrational behavior of consumers based on changes in taste – consumer theory lacks exibility and accuracy to explain changes in consumer behavior. Adopting a behavioral psychology perspective, this paper argues that there is a rational pattern in the change of consumers' tastes. I argue that behavioral psychology offers us a unique perspective to solve some of the paradoxes of consumer behavior. This paper incorporates exibility into CES utility function to more adequately account for, and differentiate between, habit formation routines. A model is developed in which habit formation and consumption of new goods are interrelated.

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Publisher Info
Paper provided by United Nations University, Maastricht Economic and social Research and training centre on Innovation and Technology in its series UNU-MERIT Working Paper Series with number 005.

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Date of creation: 2009
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Handle: RePEc:dgr:unumer:2009005

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Web page: http://www.merit.unu.edu

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Related research
Keywords: Consumer behaviour; Consumer choice; Technological change; Innovations;

Find related papers by JEL classification:
D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
D91 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Consumer Choice; Life Cycle Models and Saving
O31 - Economic Development, Technological Change, and Growth - - Technological Change - - - Innovation and Invention: Processes and Incentives

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References listed on IDEAS
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  1. George Loewenstein, Ted O'Donoghue and Matthew Rabin., 2000. "Projection Bias in Predicting Future Utility," Economics Working Papers E00-284, University of California at Berkeley. [Downloadable!]
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  2. Tversky, Amos & Kahneman, Daniel, 1986. "Rational Choice and the Framing of Decisions," Journal of Business, University of Chicago Press, vol. 59(4), pages S251-78, October. [Downloadable!] (restricted)
  3. Kahneman, Daniel & Wakker, Peter P & Sarin, Rakesh, 1997. "Back to Bentham? Explorations of Experienced Utility," The Quarterly Journal of Economics, MIT Press, vol. 112(2), pages 375-405, May.
  4. Shane Frederick & George Loewenstein & Ted O'Donoghue, 2002. "Time Discounting and Time Preference: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 351-401, June.
  5. Pollak, Robert A, 1970. "Habit Formation and Dynamic Demand Functions," Journal of Political Economy, University of Chicago Press, vol. 78(4), pages 745-63, Part I Ju. [Downloadable!] (restricted)
  6. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-91, March. [Downloadable!] (restricted)
  7. Loewenstein, George & Prelec, Drazen, 1992. "Anomalies in Intertemporal Choice: Evidence and an Interpretation," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 573-97, May. [Downloadable!] (restricted)
  8. Stigler, George J & Becker, Gary S, 1977. "De Gustibus Non Est Disputandum," American Economic Review, American Economic Association, vol. 67(2), pages 76-90, March.
  9. Harry Markowitz, 1952. "The Utility of Wealth," Journal of Political Economy, University of Chicago Press, vol. 60, pages 151. [Downloadable!] (restricted)
  10. Bianchi, Marina, 2002. "Novelty, preferences, and fashion: when goods are unsettling," Journal of Economic Behavior & Organization, Elsevier, vol. 47(1), pages 1-18, January. [Downloadable!] (restricted)
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This page was last updated on 2009-11-19.

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