A Cue-Theory of Consumption
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CitationLaibson, David I. 2001. A cue-theory of consumption. Quarterly Journal of Economics 116(1): 81-119.
AbstractPsychological 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.
Citable link to this pagehttp://nrs.harvard.edu/urn-3:HUL.InstRepos:4481496
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