Market dynamics lecture 4

Question 1

Active vs passive consumption: name all the types

Answer 1

The economic consumer
The galbraith consumer
the douglas consumer
the veblen consumer
the marchall consumer
the routine consumer

Question 2

The economic consumer

Answer 2

• based on neoclassical perspective and utility theory
• consumer assumed to perfectly know his/her preferences
• consumer assumed to optimize their utility
• little need to experiment, little need for variety

Question 3

the galbraith consumer

Answer 3

suggests that most consumers are affected by adverstising
- Dependence effect: producers proceed actively to create, extend or reinforce ‘the wants’ of a consumer

Question 4

the douglas consumer

Answer 4

introduced the notion that consumption is a social activity, not individual choice

assumption is made that an individual chooses a group than has less choice thereafter (they follow the group norms and standard

if innovation adoption leaders adopt innovation, they follow

Question 5

the veblen consumer

Answer 5

named after veblens theory of conspicuous consumption
- strong as the desire of variety, it is weak compared with the demand for distinction
- consuming to achieve and demonstrate distinciton
- distinction in novelty (adopt innovation) or antiquity (avoid innovation)

Question 6

The Marchall consumer

Answer 6

• consumption is a cumulative process, where the wants of a customer are driven by his/her activities
• the consumer is assumed to seek out new and different consumption opportunities and aims to actively get the most out of each experience
• examples made are collecting items that independently are not valuable, but together combined into something uniques

Question 7

The routine consumer

Answer 7

• the routine consumer is described as not actively seeking out optimal utility, but sticks to familiar routines in consumption
• does not change the patterns of consumption to find a new consumption experience
• tends to resist change or innovation
• most passive consumer

Question 8

Paper Shane (2000) prior knowledge and the discovery of entrepreneurial opportunities

Answer 8

Central findings:
- all individuals are not likely to recognize a given opportunity
- prior knowledge can help entrepreneurs to discover opportunites through recognition rather than research

Question 9

The speed of diffusion depends on

Answer 9

the speed of quality improvement
the reduction of prices
the variance of willingness-to-pay

Question 10

Herd behavior
Network effect

Answer 10

if in the ecosytem or network of a company or consumer, others are adopting a technology or innovation, the benefits to adopt it increase

Question 11

Herd behavior
penguin effect

Answer 11

adopting a technology/ innovation becasue others have proven that it likely is safe to do so

Question 12

herd behavior
distinction effect

Answer 12

herd behavior can also cause firms or consumers to do something different than the herd

Question 13

Bandwagon effect

Answer 13

the innnovation or technology that gets ahead it typically locked –> this can lead to dominant design

Question 14

Startup

Answer 14

a temporary organization designed to search for a repeatable and scalable business model in an environment of extreme uncertainty

Question 15

Incumbent

Answer 15

Entrepreneurial thinking and practices in large companies

Question 16

How to respond to disruption?

Answer 16

Response 1: focus and invest in the traditional business
Response 2: ignore the disruption
Response 3: Attack back! disrupt the disruption and improve own business
Response 4: Adopt the innovation, adopt the disruption and play out your own game