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Cumulative Utility and Consumer Theory

Author

Listed:
  • Itzhak Gilboa

    (Northwestern University [Evanston])

  • David Schmeidler

    (Tel Aviv University - Tel Aviv University, OSU - Ohio State University [Columbus])

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.

Suggested Citation

  • Itzhak Gilboa & David Schmeidler, 1997. "Cumulative Utility and Consumer Theory," Post-Print hal-00753137, HAL.
  • Handle: RePEc:hal:journl:hal-00753137
    Note: View the original document on HAL open archive server: https://hal-hec.archives-ouvertes.fr/hal-00753137
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    Cited by:

    1. 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.
    2. 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.
    3. 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.
    4. Matsui, Akihiko, 2000. "Expected utility and case-based reasoning," Mathematical Social Sciences, Elsevier, vol. 39(1), pages 1-12, January.
    5. 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.
    6. Noah Gans, 2002. "Customer Loyalty and Supplier Quality Competition," Management Science, INFORMS, vol. 48(2), pages 207-221, February.
    7. Felipe Caro & Victor Martínez-de-Albéniz, 2012. "Product and Price Competition with Satiation Effects," Management Science, INFORMS, vol. 58(7), pages 1357-1373, July.

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    Keywords

    Cumulative Utility; Consumer Theory;

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