Diminishing Marginal Utility: What Happens When You Feed Chocolate to a Lab Rat (I mean volunteer!).
We had some very interesting results in today's laboratory, which centered on the Law of Diminishing Marginal Utility, part of the "Exchange Theory of Value" idea that people will derive less enjoyment from the consumption of every extra unit of a product that they consume. And, since the price value of a product is determined by a combination of both its abundance and its desirability, if the desirability of a product declines over time as consumers consume more and more units of whatever it is, the problem for producers becomes "How do we stop the decline?" That is where Madison Avenue enters the picture: bigger, bolder, fresher; new and improved; now in the hefty-sized box; brighter colors, BOGO.... all of these are techniques that might reset a consumer's "satisfaction button" and keep their marginal utility from sliding to "I don't want that any more!" additionally, people deal with DMU by consuming a wide variety of goods and services, which helps us to forestall that "Been there, done that" feeling.
Each of our volunteers was female, approximately 16 years old. We tried to control the experiment carefully, but in one instance, experienced problems with information provided by the lead experimenter that may have influenced the outcome. On the other hand, even this yielded some interesting results. We had the volunteers sit on a stool with the plotting graph behind them. They could not see the bag from which the candy bars (Hershey's snack-size) were drawn. The volunteers were instructed to eat each bar entirely, then asked to rate their level of satisfaction from eating that bar on a 1 -10 scale. the audience was asked not to interact with the volunteers.
We learned from this experiment that, as people consume additional units of a product, their marginal utility tends to decline unless some stimulus is provided that "revitalizes" their satisfaction. In the case of Section 4, the lead experimenter told the volunteer that they could have some water when they were done. he also told her that the next candy bar would be her last (a fib!). Just as when a company repackages a product or jiggers the formula to make it "New and improved," we saw that the volunteer's marginal utility actually rose.
In Section 8, we observed what happens when a volunteer's initial valuation of the product is not high to begin with: starting with a relatively low marginal utility, it took almost no time at all for her satisfaction to plummet: within a few chocolate bars, she had had quite enough.
Section 1 Results: Round/Utility, each round represents the consumption of a chocolate bar:
1/10; 2/10; 3/8; 4/7; 5/6; 6/5; 7/4 (terminated). Prior to the experiment, the volunteer expressed an overall fondness for chocolate at 10 on a 10-point scale.
Section 4 Results: Note, that the experiment was terminated in Round 8 because the volunteer had hidden the candy instead of eating it.
1/10; 2/10; 3/8; 4/7; 5/6; 6/7 (This is where we told her she could have water afterwards, and that this would be her last candy bar); 7/7 (terminated). Overall fondness for chocolate: 8.
Section 8 Results: 1/6; 2/3; 3/0. As you can see, this volunteer didn't like chocolate as much as she thought she did. Perhaps it was because she had eaten lunch, while the volunteers in the morning sections had not. If she had kept eating, she certainly would have experienced what is called disutility (sickness). Her overall fondness for chocolate prior to the trial was 5 to 6.
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