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Learning How to Consume and Returns to Product Promotion

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  • Babutsidze, Zakaria

    () (UNU-MERIT)

Abstract

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.

Suggested Citation

  • Babutsidze, Zakaria, 2009. "Learning How to Consume and Returns to Product Promotion," MERIT Working Papers 018, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
  • Handle: RePEc:unm:unumer:2009018
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    References listed on IDEAS

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    More about this item

    Keywords

    Consumer skills; learning by consuming; consumer socialization; product promotion; returns to advertising;

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques

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