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Adaptation of Tastes to Constraints

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  • Heinz Welsch

Abstract

This paper examines a model in which people’s preferences adjust to changes in their relative ability to attain various goals. Preference changes are modeled as changes in the configuration of weights (or values) attached to these goals. The model permits to explain common prototype changes of preferences such as the ‘sour grapes’ or the ‘overcompensating’ phenomenon. It is found that whether the first or the second phenomenon occurs depends on whether a goal is easy or difficult to substitute by other goals. If two goals are sufficiently strong substitutes for each other, no weight will be placed on that goal which is harder to attain. The results readily apply to the standard microeconomic set-up involving goods and prices, rather than abstract goals and abilities. In this case, one implication of the model is that only a subset of the overall commodity space is relevant for everyday consumer choice, which reduces the complexity of the choice procedure. The model also permits to explain how new and unfamiliar products are incorporated into the consumer’s preference pattern. Copyright Springer 2004

Suggested Citation

  • Heinz Welsch, 2004. "Adaptation of Tastes to Constraints," Theory and Decision, Springer, vol. 57(4), pages 379-395, December.
    • Handle: RePEc:kap:theord:v:57:y:2004:i:4:p:379-395
    DOI: 10.1007/s11238-005-0283-y
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    References listed on IDEAS

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    1. George A. Akerlof & Rachel E. Kranton, 2000. "Economics and Identity," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 115(3), pages 715-753.
    2. Bruno S. Frey & Alois Stutzer, 2002. "What Can Economists Learn from Happiness Research?," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 402-435, June.
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