Learning How to Consume and Returns to Product Promotion
This paper presents the computational model of consumer behaviour. We consider two sources of product specic consumer skill acquisition, termed here as learning how to consume: learning by consuming and consumer socialization. Consumers utilize these two sources in order to derive higher valuations for products they are consuming. In this framework we discuss the behavior of returns to product promotion relative to the changes in product characteristics, such as quality and userfriendliness, as well as in case of varying intensity of consumer socialization. The main finding is that in case of duopoly the dependence of returns to advertising on product quality is not monotonic as it has been claimed by earlier studies. Additional important finding indicating the importance of the models with interacting agents is that returns to advertising exhibit qualitatively different behavior in case of zero intensity of consumer socialization.
|Date of creation:||2009|
|Date of revision:|
|Contact details of provider:|| Postal: P.O. Box 616, 6200 MD Maastricht|
Phone: (31) (0)43 3883875
Fax: (31) (0)43 3216518
Web page: http://www.merit.unu.edu/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Paul R. Milgrom & John Roberts, 1984.
"Price and Advertising Signals of Product Quality,"
Cowles Foundation Discussion Papers
709, Cowles Foundation for Research in Economics, Yale University.
- Cowan, Robin & Cowan, William & Swann, Peter, 1997.
"A model of demand with interactions among consumers,"
International Journal of Industrial Organization,
Elsevier, vol. 15(6), pages 711-732, October.
- Cowan, R. & Cowan, W. & Swann, P., 1996. "A Model of Demand with Interactions Among Consumers," UWO Department of Economics Working Papers 9609, University of Western Ontario, Department of Economics.
- Caselli, G & Ventura, J, 1996.
"A Representative Consumer Theory of Distribution,"
534, Harvard - Institute for International Development.
- Philip R. Vande Kamp & Harry M. Kaiser, 2000.
"Optimal Temporal Policies in Fluid Milk Advertising,"
American Journal of Agricultural Economics,
Agricultural and Applied Economics Association, vol. 82(2), pages 274-286.
- Vande Kamp, Philip R. & Kaiser, Harry M., 1998. "Optimal Temporal Policies in Fluid Milk Advertising," Research Bulletins 122676, Cornell University, Department of Applied Economics and Management.
- Weisbuch, Gérard & Battiston, Stefano, 2007. "From production networks to geographical economics," Journal of Economic Behavior & Organization, Elsevier, vol. 64(3-4), pages 448-469.
- Scheinkman, Jose A & Woodford, Michael, 1994. "Self-Organized Criticality and Economic Fluctuations," American Economic Review, American Economic Association, vol. 84(2), pages 417-21, May.
- Schmalensee, Richard, 1978. "A Model of Advertising and Product Quality," Journal of Political Economy, University of Chicago Press, vol. 86(3), pages 485-503, June.
- Petr Mariel, 2005. "Nonparametric Estimation of the Effects of Advertising: The Case of Lydia Pinkham," The Journal of Business, University of Chicago Press, vol. 78(2), pages 649-674, March.
- Alan P. Kirman, 1992. "Whom or What Does the Representative Individual Represent?," Journal of Economic Perspectives, American Economic Association, vol. 6(2), pages 117-136, Spring.
- Landes, Elisabeth M & Rosenfield, Andrew M, 1994. "The Durability of Advertising Revisited," Journal of Industrial Economics, Wiley Blackwell, vol. 42(3), pages 263-76, September.
- Kihlstrom, Richard E & Riordan, Michael H, 1984. "Advertising as a Signal," Journal of Political Economy, University of Chicago Press, vol. 92(3), pages 427-50, June.
- Cowan Robin & Cowan William & Swann Peter, 1998.
"Waves in Consumption with Interdependence among Consumers,"
007, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
- Robin Cowan & William Cowan & G.M. Peter Swann, 2004. "Waves in consumption with interdependence among consumers," Canadian Journal of Economics, Canadian Economics Association, vol. 37(1), pages 149-177, February.
- Nelson, Philip, 1974. "Advertising as Information," Journal of Political Economy, University of Chicago Press, vol. 82(4), pages 729-54, July/Aug..
- Arthur, W Brian, 1989. "Competing Technologies, Increasing Returns, and Lock-In by Historical Events," Economic Journal, Royal Economic Society, vol. 99(394), pages 116-31, March.
- Stegeman, Mark, 1991. "Advertising in Competitive Markets," American Economic Review, American Economic Association, vol. 81(1), pages 210-23, March.
- Ward, Scott, 1974. " Consumer Socialization," Journal of Consumer Research, Oxford University Press, vol. 1(2), pages 1-14, Se.
- Babutsidze, Zakaria & Cowan, Robin, 2008. "Habit Formation, Information Exchange and the Social Geography of Demand," MERIT Working Papers 047, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
- Gary S. Becker & Kevin M. Murphy, 1993. "A Simple Theory of Advertising as a Good or Bad," The Quarterly Journal of Economics, Oxford University Press, vol. 108(4), pages 941-964.
- LeBlanc, Greg, 1998. "Informative Advertising Competition," Journal of Industrial Economics, Wiley Blackwell, vol. 46(1), pages 63-77, March.
- Cowan, Robin, 1991. "Tortoises and Hares: Choice among Technologies of Unknown Merit," Economic Journal, Royal Economic Society, vol. 101(407), pages 801-14, July.
When requesting a correction, please mention this item's handle: RePEc:unm:unumer:2009018. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ad Notten)
If references are entirely missing, you can add them using this form.