The Effect of Marketing and its Influence on Consumer Preferences in an Optimal Choice Model
Miriasov I. О.

Miriasov, Iurii О. (2019) “The Effect of Marketing and its Influence on Consumer Preferences in an Optimal Choice Model.” The Problems of Economy 1:134–140.
https://doi.org/10.32983/2222-0712-2019-1-134-140

Section: Economic theory

UDC 330.101.54 (138.21)

Abstract:
The central problem of this work is the identification of opportunities and objective constraints of the impact on demand for products of companies, justification of mechanisms and tools ensuring the formation and management of demand, depending on type of the market structure to which the company belongs. Consumer demand is considered as a two-tier category. Functional demand is determined by the consumer characteristics of a good and the objective needs they satisfy. The formation of functional demand is subject to the principle of consumer rationality. Non-functional demand is a variable component of demand which reflects the subjective attitude of the consumer to the benefits and is subject to the principle of rationality to a lesser extent. The main role here is played by social, speculative and irrational motives. Along with the known effects of prestigious consumption, snob, and joining the majority, in the structure of non-functional demand, the effect of marketing can be singled out. This effect, firstly, distorts consumer preferences and their utility function, secondly, leads to new consumer equilibrium which is not optimal from the point view of the principle of rationality. The influence of the effect of marketing is illustrated using an optimal consumer choice model, within which changes in individual demand with changes in the price for goods are analyzed, and the formation of new consumer equilibrium is subject to the effects of income and substitution. It is shown that the effect of marketing in this case can absorb or neutralize the income effect or the substitution effect, depending on the type of goods included in this model. The paper shows that the prerequisite for transforming the utility function and consumer equilibrium is the vertical and horizontal differentiation of goods, and advertising and product branding are the tools that generate marketing effect and affect demand.

Keywords: demand, utility function, marketing effect, income effect, substitution effect, product differentiation.

Fig.: 6. Bibl.: 14.

Miriasov Iurii О. – Candidate of Sciences (Economics), Associate Professor, Associate Professor, Department of Economic Theory and Economic Methods of Management, V. N. Karazin Kharkiv National University (4 Svobody Square, Kharkіv, 61022, Ukraine)
Email: miryurij@gmail.com

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