Quality of Mass Goods and the Problem of the Representative Consumer
Ekonomia – Zarzadzanie – Marketing. Tryptyk Sadecki. Ksiega jubileuszowa dedykowana prof. J. Dietlowi
10 Pages Posted: 24 Jul 2008 Last revised: 13 Nov 2010
Date Written: 2007
Most economic models assume the existence of a representative consumer with mean preferences, which is an obvious simplification. Consumers unveil their heterogeneous preferences through continual choices over goods and their characteristics. However, there is a limit to product segmentation: marketing costs and production costs related to diseconomies of scale. Moreover, mass goods must yield the same quality for the same price for a large number of consumers in a given market. Therefore, the key is to know the consumers' preferences to properly address the product mix. This article explores what quality is from the economic point of view and how difficult it is to set the appropriate quality-price bundle. One can think of voting over plausible outcomes of quality and price. However, if there are three or more consumers with different preferences over two or more variables, stable equilibrium may be impossible to achieve (impossibility theorem), since there will always be a majority in favor of change (paradox of voting). A viable solution to approach the optimum product mix can be the use of interactive methods for multi-criteria optimization.
Note: Downloadable document is in Polish.
Keywords: Voting paradox, consumer behavior, preferences, mass goods, quality
JEL Classification: D01, D11, D72, D81, H41
Suggested Citation: Suggested Citation