How individuals interact with each other when making their utility judgement?

Yesterday I talked about what differences could be caused when we consider whether or not individuals make their utility judgement independently. Today I want to carry on this topic and make some guesses about how individuals may interact with each other when making their utility judgement and the reasons behind it.

The reasons for people having incentives to interact with each other have several. Firstly, people do not think that they have full access to information in order to make precise estimates about the utilities of products they are going to buy. Therefore, people want to borrow others’ estimates or opinions to try to close the gap between their knowledge and perfect knowledge. Secondly, people are correct that they do not have full access to information. Thirdly, others’ opinions may be another important determinant of utilities, especially the products can be resold to others.

There are many ways for people to have information about others’ estimate of utilities, and here are the most common ones. Firstly, people can directly ask their family members or friends about opinions about their target products. Secondly, people can read suppliers’ introduction about the products, especially the advertises. In this case, people’ utilities are affected by advertising created by suppliers. Thirdly, people can receive signals of others’ opinions about the products by looking at the market prices. Prices can provide implications about products’ utilities, including their popularity, qualities, effectiveness and many other relevant characteristics. Fourthly, people can receive signals of others’ opinions about the products by observing how many people surrounding them are using the products they are interested at. More people are using implies utilities are relatively high.

Overall, people are interacting with each other in the hope of improving their utility judgement.