A Behavioural Analysis of Demand Elasticities

Abstract

It is argued on the basis of ideas from personal construct psychology that people feel attached, or desire strongly to become attached, to particular consumption pathways because they judge that to do otherwise would carry “implications” of a predominantly negative kind with respect to their abilities to make sense of the complex and uncertain world around them. It is noted that information‐processing problems may make it impossible for consumers to compute the overall implications of alternative strategies when market conditions change. Hence they may use simplifying decision procedures which may conflict with the principle of substitution.