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.
Key Words: Consumer skills, learning by consuming, consumer socialization, product promotion, returns to advertising.
JEL codes: D11, M37, C63.
UNU-MERIT Working Papers ISSN 1871-9872