A Cue-Theory of Consumption

By David Laibson. 2001

378 citations recorded by the source corpus.

Psychological 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.

Subfields: Marketing, Plant Science

View Paper: https://www.semanticscholar.org/paper/296af902a51c860754600823022e174ae08fecb1

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Citations in the corpus

Pavlovian Processes in Consumer Choice: The Physical Presence of a Good Increases Willingness-to-Pay (2010, background): “Second, cues are also thought to trigger habitual behavioral responses that promote drug seeking behaviors even if utility maximization calculations suggest that this is not the optimal course of behavior (Bernheim and Rangel 2004; David A. Reddish 2004; Rangel, Camerer, and Montague 2008).”
Self-Control and the Development of Work Arrangements (2010, neutral): “Over time, people come to relate environmental factors with specific behaviors, altering the payoffs from those behaviors in the presence of the associated cues (Laibson 2001).”
Neuroeconomics: Why Economics Needs Brains (2004, background): “Laibson (2001) created a pioneering formal model of cue-dependent use, showing that there are multiple equilibria in which cues either trigger use or are ignored.”
Neuroeconomics: How Neuroscience Can Inform Economics (2005, neutral): “David Laibson’s presentations have been particularly helpful, as were comments and suggestions from the editor and referees, and conversations and comments from Ralph Adolphs, John Allman, Warren Bickel, Greg Berns, Meghana Bhatt, Jonathan Cohen, Angus Deaton, John Dickhaut, Paul Glimcher, Dave Gret”
Time Discounting and Time Preference: A Critical Review (2002, background): “Laibson, Andrea Repetto and Jeremy Tobacman (1998), and George-Marios Angeletos, Laibson, Repetto, Tobacman and Stephen Weinberg (2001) calibrate models of consumption-saving decisions, using both exponential discounting and (β,δ) hyperbolic discounting.”
The Effect of Fast Food Restaurants on Obesity and Weight Gain (2009, positive): “John Cawley and Feng Liu ( 2007 ) show that employed mothers spend less time cooking. model Raphael Thomadsen ( 2001 ) estimate a discrete choice of supply and demand that links prices to market structure and geographical dispersion of fast food outlets in California.”
Using Behavioral Economics to Design More Effective Food Policies to Address Obesity (2014, background): “Visceral factors lead consumers to attend and respond to short-term desires in favor of long-term self-interest (Loewenstein 1996; Loewenstein and Angner 2003; Loewenstein and Schkade 1999) and are often activated by exposure to a cue, such as a smell, sound, or sight, that temporarily elevates crav”
The Role of Feelings in Investor Decision-Making (2005, neutral): “Loewenstein et al. (2002) and Laibson (2000) outline many instances of the influence of emotions on economic behaviour, including on advertising and on consumer expenditure.”
The Evolutionary Foundations of Preferences (2011, background): “Laibson [71] examines a model in which instantaneous utilities adjust in response”
Happiness and Time Preference: The Effect of Positive Affect in a Random-Assignment Experiment (2011, methodology): “In summary, the practical implications of our research are similar to those called upon in Laibson (2001) in reference to the effect of cues on consumption: “ … when consumers understand these mechanisms, consumers try to influence the sequence of cues they experience (e.g., recovering alcoholics…”