Consumer behaviour: Utility maximization and a quest for novelty
Abraham Garcia Torres, MERIT, Maastricht University
Evolution of consumers' preferences has been recognized by many scholars as being key to understanding technological change. However, mainstream economics cannot account for the seemingly irrational behavior of consumers based on changes in taste -- consumer theory lacks flexibility and accuracy to explain changes in consumer behavior. Adopting a behavioral psychology perspective, this paper argues that there is a rational pattern in the change of consumers' tastes. I argue that behavioral psychology offers us a unique perspective to solve some of the paradoxes of consumer behavior. This paper incorporates flexibility into Pollak's (1970) utility function to more adequately account for, and differentiate between, habit formation routines. A model is developed in which habit formation and consumption of new goods are interrelated.
Date: 23 March-00 0000