Cumulative utility consumer theory

This paper makes some preliminary steps towards a dynamic theory of consumer choices, restricted to the case of repeated small decisions. We assume that the consumer chooses among products, rather than among bundles, and that she bases her decision on a cumulative satisfaction index. The (instantaneous) utility of a product is closely related to the relative frequency with which it is consumed. The aggregation of choices among products implicitly defines a choice of a bundle. We propose to incorporate a product's price directly into its utility, and show that it is consistent with balancing the consumer's budget.