Marshallian Economic Theory and Consumer Utility Analysis
Marshall and the Modern Theory of Utility
Alfred Marshall inferred that work, the consequences of provisional hypotheses, and specific steps would subsequently modify their chances in the direction of greater realism. Over the years, his methods and hypotheses have been refined to become what is now known as the modern theory of utility; i.e., the "economic man" is committed to maximizing his utility and carefully calculates the felicific consequences of any purchase.
Generally, marketing professionals reject Marshall's economic theory due to its insistence on logic, rationality, and behavior in the purchase order, especially when thinking of a person calculating the marginal utility of a meal in a restaurant compared to a homemade one. However, from one point of view, the model remains true: it sustains that the buyer acts in view of their maximum interest. The individual is primarily interested in Marshallian economic cues—such as price and income—and performs quick calculations of utility before any purchase.
Key Definitions in Economic Theory
- Utility: Understood here as the ability to meet requirements. It is a concept postulated by Jeremy Bentham to explain product demand.
- Hedonism: A philosophical doctrine where pleasure-seeking is life's purpose. Bentham was its great defender.
Consumer Behavior Analysis
Economically Rational Content
Ratchford used this approach to analyze the optimization of the search process by comparing the utility of the alternative elected with the most useful option in the case of perfect information. This perspective stems from classical ideas of utility maximization, derived from the fact that marginal benefit equals the marginal cost of demand.
The economistic perspective explains the behavior of seeking information in relation to costs and benefits.
Stigler and the Cost-Benefit Perspective
George Stigler posited that the behavior of consumer demand chases a minimum price. The optimal amount is determined when the expected marginal benefit equals the expected marginal cost. This causes consumers with higher search costs to obtain less information. The cost-benefit perspective is simple, solid, and widely accepted in literature.
Limitations of Economic Models
However, these models have limitations arising from the costs and benefits of demand:
- First Limitation: It is necessary to consider any aspect or criterion that the consumer considers relevant in deciding what affects the costs and benefits associated with demand.
- Second Limitation: The assumption derives from optimizing behavior. Instead of an optimal point where demand ends, there is simply a point at which the search stops.
- Third Limitation: These models do not explain what causes the differences in backup utility among different consumers, nor do they consider that usefulness varies as demand increases.
Some authors have been concerned with improving and overcoming these limitations by incorporating both conceptual and methodological improvements.