A Cue-Theory of Consumption

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A Cue-Theory of Consumption

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Title: A Cue-Theory of Consumption
Author: Laibson, David I.
Citation: Laibson, David I. 2001. A cue-theory of consumption. Quarterly Journal of Economics 116(1): 81-119.
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Abstract: Psychological experiments demonstrate that repeated pairings of a cue and a consumption good eventually create cue-based complementarities: the presence of the cue raises the marginal utility derived from consumption. In this paper, such dynamic preferences are embedded in a rational choice model. Behavior that arises from this model is characterized by endogenous cue sensitivities, costly cue-management, commitment, and cue-based spikes in impatience. The model is used to understand addictive/habit-forming behaviors and marketing. The model explains why preferences change rapidly from moment to moment, why temptations should sometimes be avoided, and how firms package and position goods.
Published Version: http://dx.doi.org/10.1162/003355301556356
Terms of Use: This article is made available under the terms and conditions applicable to Other Posted Material, as set forth at http://nrs.harvard.edu/urn-3:HUL.InstRepos:dash.current.terms-of-use#LAA
Citable link to this page: http://nrs.harvard.edu/urn-3:HUL.InstRepos:4481496
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