The Behavioral Economics in Marketing’s Podcast Utility Theory | Definition Minute | Behavioral Economics in Marketing Podcast
Jan 18, 2023
A quick look at utility theory and why consumers choose what makes them most satisfied. A bite-sized explanation of the util as a unit of satisfaction. Short examples show how preferences differ by person and context. A compact primer on how satisfaction shapes buying decisions.
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Choices Driven By Subjective Satisfaction
- Utility theory says consumers choose based on the satisfaction (utility) they expect from a product or service.
- Utility is subjective, measured in 'utils', and varies between people and situations.
Utility Quantified As 'Utils'
- Utility measures the benefit consumers derive from economic decisions and is expressed in 'utils'.
- The number of utils assigned depends on personal preferences and differs from person to person.
Ice Cream Example Shows Relative Utility
- Sandra gives an ice cream example to show differing utils: one person might assign 25 utils, another 5 utils.
- She notes extreme situations, like an eating contest, can turn positive utility into negative utility.