CUMULATIVE UTILITY CONSUMER THEORY

This paper makes some preliminary steps towards a dynamic theory of co nsumer choices, restricted to the case of repeated small decisions. We assume that the consumer chooses among products, rather than among bu ndles, and that she bases her decision on a cumulative satisfaction in dex. The (instantaneous) utility of a product is closely related to th e relative frequency with which it is consumed. The aggregation of cho ices among products implicitly defines a choice of a bundle. We propos e to incorporate a product's price directly into its utility, and show that it is consistent with balancing the consumer's budget.