Adaptation of Tastes to Constraints
This paper examines a model in which peopleâ€™s preferences adjust to changes in their relative ability to attain various goals. Preference changes are modeled as changes in the configuration of weights (or values) attached to these goals. The model permits to explain common prototype changes of preferences such as the â€˜sour grapesâ€™ or the â€˜overcompensatingâ€™ phenomenon. It is found that whether the first or the second phenomenon occurs depends on whether a goal is easy or difficult to substitute by other goals. If two goals are sufficiently strong substitutes for each other, no weight will be placed on that goal which is harder to attain. The results readily apply to the standard microeconomic set-up involving goods and prices, rather than abstract goals and abilities. In this case, one implication of the model is that only a subset of the overall commodity space is relevant for everyday consumer choice, which reduces the complexity of the choice procedure. The model also permits to explain how new and unfamiliar products are incorporated into the consumerâ€™s preference pattern. Copyright Springer 2004
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- George A. Akerlof & Rachel E. Kranton, 2000. "Economics and Identity," The Quarterly Journal of Economics, Oxford University Press, vol. 115(3), pages 715-753.
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CESifo Working Paper Series
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- Bruno S. Frey & Alois Stutzer, . "What can Economists Learn from Happiness Research?," IEW - Working Papers 080, Institute for Empirical Research in Economics - University of Zurich.
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