Learning How to Consume and Returns to Product Promotion

Zakaria Babutsidze

No 2009-018, MERIT Working Papers from United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT)

Abstract: 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.

Keywords: Consumer skills; learning by consuming; consumer socialization; product promotion; returns to advertising (search for similar items in EconPapers)
JEL-codes: C63 D11 M37 (search for similar items in EconPapers)
Date: 2009
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Working Paper: Learning How to Consume and Returns to Product Promotion (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:unm:unumer:2009018

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