Laibson, David2010-10-142000Laibson, David I. 2001. A cue-theory of consumption. Quarterly Journal of Economics 116(1): 81-119.0033-5533http://nrs.harvard.edu/urn-3:HUL.InstRepos:4481496Psychological 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.en-USJournal Article2010-10-1410.1162/003355301556356