Title

Can Changing Prices Affect Consumer Preferences?

Department

Economics

Publication Year

2010

Abstract

All students of microeconomics understand that the specific choice that a rational consumer makes among many possible and alternative combinations depends on the consumer's preferences and on the information embedded in the consumer's budget constraints, that is, prices of all related goods and the consumer's budget. Furthermore, whenever at least one of these variables changes, be it consumer's tastes, prices, or income, the specific choice of the consumer changes correspondingly. What remains substantially under-studied is whether there is correlation between changes in the subjective (tastes) and objective (prices and income) elements of choice.

The question of whether excise taxes and subsidies, and so price, affect not only the consumer's choice but also consumer's preferences is the subject of this thesis. this question has a clear interdisciplinary character, as it merges the subjective and the objective, the individual and the social, the measurable and the unquantifiable aspects of choice; in addition, it befriends possibilities of social engineering, in the sense that a policy intended to discourage or encourage certain consumption habits through price (dis)incentives is essentially a policy intended to train individuals. In this thesis I intend to address the interdisciplinary nature of this question by analyzing the microeconomic, psychological, and marketing literature on consumer choice and preferences.

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