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3.2 UTILITY FUNCTIONS 87

APPLICA TION 3.1
Influencing Your Preferences As can be seen in Figure 3.10, Super Bowl ad

prices gradually rose over time to the record price in
The theory of consumer behavior assumes that the in- 2009. Ad prices tend to be higher when a more excit-
difference map for a consumer is given exogenously ing game is anticipated. For example, prices rose dra-
and remains fixed. In reality, a consumer’s preferences matically for the 1998 Super Bowl, when the Denver
can change over time, and with age, education, or ex- Broncos upset the Green Bay Packers for the champi-
perience. Preferences may also change as a result of onship of the National Football League in a very close
actions designed to influence consumer attitudes game. Prices sometimes decline during a recession, as
about goods and services. they did in 2001 and 2002. Despite the severe reces-
Firms often pay great sums of money for the op- sion in 2009, prices rose. As a result, NBC was re-
portunity to influence your preferences by advertis- ported to have more difficulty selling all of the com-
ing. For example, for the telecast of the 2009 Super mercial slots than in prior years (both FedEx and
Bowl, NBC was able to charge an average of $3 mil- General Motors, regular Super Bowl advertisers, did
lion for each 30-second commercial. Why would an not buy ads that year). Average prices may have been
advertiser pay so much? Super Bowl ratings are al- higher because many ads were sold prior to
ways high, regardless of how interesting the game September 2008, when the recession began to be felt
is. When ratings are high, advertisers know their most strongly.
messages will reach millions of households. In addi- The government and interest groups can also
tion, while TV viewers often find commercials to be influence consumer preferences. For example, in
an annoyance, that changes during the Super Bowl. 1953 the American Cancer Society issued its own
Many viewers look forward to the humorous and warning about smoking, when it published a report
creative ads that companies run during the game. linking cigarette smoking with cancer. Some govern-
Furthermore, advertisers get extra publicity from ments require cigarette producers to place graphic
good ads, since the media discusses Super Bowl ads pictures (e.g., of oral cancer) on packages as a warn-
at great length. ing to consumers about the dangers of smoking.

Super Bowl Ad Prices
(30-second ad)
$3,000,000

$2,500,000
Price (2009 dollars) $2,000,000

$1,500,000
$1,000,000

$500,000

$0
1969 1974 1979 1984 1989 1994 1999 2004 2009
Year

FIGURE 3.10 Prices of Super Bowl Television Ads
The prices of 30-second ads are expressed in 2009 dollars.
Sources: Advertising Age for 1969–2007; Reuters for 2008–2009.