Tastes and
preferences are determinant of demand. The changing taste and preferences
determine the changing patterns of demand. If there were to be demand creates
supply, it would be reflected through the changing tastes and preferences. An instance
would be in order. On September 11, 2020, it marked nineteen years since the
two aircraft were hijacked to crash into the World Trade Centre Towers in New
York. The Western world was brought to the reality of the gory Islamic
terrorism. It is a different matter that war against Islamic terrorism still
continues and at times it seems to happen in spits and bursts and not apparent
conviction behind the same.
Yet aside from
it, was the trauma it created in a whole population in the US. The Americans
were terrified without doubt. There were scared to move out, to interact and
many having lost their near and dear ones plunged into depression and
loneliness. There was certain change in the purchase patterns in the US. Many Americans
began buying toys and dolls. Teddy Bears began to be sold more. People needed
company and these toys and dolls provided them. As people had lost their dear
ones, they had no one to comfort them. In their moment of pall, gloominess and
despair, the toys and dolls seemed to be their only source of comfort. The sales
of Teddy Bears began to pick up. In fact it seemed that to a generation of the
Americans young and old, these dolls would be a new source of company. Tastes and
preferences changing and leading to new demand patterns. Quite often, this
phenomenon is quoted as text book example of taste and preferences
characterising the patterns of demand.
Tastes and
preferences are heterogeneous in nature and individualistic in their
expression. Yet, there exists a group preference which might be at odds with
individual preference. Furthermore, there might be conflicting across cultures
in expression and manifestation of preferences. Noted consumer theorist Sheena
Iyengar narrates an instance wherein she ordered a certain combo with coffee in
Japan which was perhaps found amusing by the Japanese service guy. He simply could
not to terms that she could have a combo which apparently was not unusual in
her country US. Yochai Benkler talked about a different incident in Spain. He decided
to tip the restaurant guys which would have been common and the norm in the US
but in Spain it created some sense of discomfort and disappointment. He has to
reposition it stating it is for the drinks to all the staff that he was
sponsoring or so.
Frequently,
internet and social media is abuzz with some unusual dishes that that are being
talked about. The reactions to these dishes whether Facebook, Instagram,
Whatsapp, Twitter or any other platform indicates the extent of disagreement
and the expanse of the expression of same as reflection of taste heterogeneity.
It is just about experimentation but the reactions to the experiments bordering
on resistance and ridicule that manifests the heterogeneity and extremity in
tastes and preferences.
While tastes and
preferences do doubt shape demand and thus supply, the question does remain on
how to measure tastes and preferences. One way to measure would be the group
preferences. The group preferences are aggregate of individual preferences but
manifest in a way very different from the individual preferences. Parking a car
would be a routine activity, yet the parking of a car of the first person to
enter the lot would determine how others park their car, something discussed
quite elaborately in the past posts highlighting the economic analysis of
Thomas Schelling. At an individual level, the analysis would have to separate
the stated preference from their actual preference exercised. A couple of
instances would be in order to explain the assertion. Indians when asked
question about their views on caste or religion would tend to describe
themselves as broad minded and not bothered about caste, sub-caste, religion
etc. Yet while this is their stated preference, the revealed preference so as
to speak often emerges very differently. The best example would be the market
for marriages wherein they would be very particular down to the gotra. The ads
for marriages on various online portals like Shaadi.com as also in the
newspapers testify to the exhibition of preferences perhaps in contrast to what
they have stated. One is not digging into the merits or demerits of the same. It
is a proposition that needs to be examined in a different place. Similarly, the
owners of the residential spaces demonstrate high degree of choosiness when
they rent out their residential spaces. It again is in contrast to their often
stated views on religion caste, race etc. It must be pointed that they might
have valid reasons for the preference being exhibited but the point to
illustrate is a mechanism to measure the true preferences.
Preferences are
of course deemed to consistent and clear. The buyer is clear on what they
expect. Their choices reflect the utility they generate by exercising their
choices. The more the additional utility they generate by consuming an
additional unit of a good, the more they will consume. Consistency is something
that the choices are clear. There is no unpredictability in choices. There is
no dichotomy that gets exhibited. Furthermore, the baskets are not divisible. The
basket of choices is indivisible. A consumer so as to speak cannot be
purchasing a half basket of goods. In other words, the basket is lumpy. Therefore,
any analysis of choices would have to factor in the basket of goods the consumer
desires to buy.
The tastes and
preferences are not often exhibited in isolation but in the context of the
basket of goods that the consumer chooses to consume. While there is no doubt
an analysis that is required to purchase a good in isolation, yet the analysis
would remain incomplete without factoring in the basket of goods. The utility
they generate in consuming the good is not independent but an outcome of the
comparison with the other goods in the basket. It is not about mere eating out
once in a week for instance but the whole experience of shopping or watching a
movie or hitting a party circuit of which eating out forms one part. Therefore,
an analysis of the taste and preferences in basket terms must be taken up.
However, that is for another day.
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