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12 Examples of Consumer Sovereignty

Consumer sovereignty is the principle that people have the authority to make their own purchasing decisions. This is a basic foundation of capitalist and social market economies with the alternatives being that governments or firms dictate what goods consumers will receive. The following are illustrative examples of consumer sovereignty.

Consumer Needs

Under consumer sovereignty, consumer needs are the primary driver of demand for goods. These needs include basic needs such as food and shelter and needs related to self-fulfillment, experience and social status such as books, vacations or luxury fashions. According to consumer sovereignty, there is no government role in telling people what is a "true need" and what is excessive consumption.

Consumer Perceptions

Consumers buy goods based on their perceptions of things like quality and price. These perceptions are another basic driver of demand in a capitalist or social market economy. For example, if people perceive cotton socks as higher quality than polyester socks, these will receive high demand at the same price.

Allocation of Resources

Consumer sovereignty causes producers to scramble to meet consumer needs and align to their perceptions. This is efficient as the capital of society is put to work producing goods that people want.

Free Markets

Consumer sovereignty doesn't work if firms aren't also free to produce what they believe will meet consumer demand. As such, economic freedoms such as the right to start and operate a business without undue government interference are a basis for consumer sovereignty.


Fair competition is a requirement for consumer sovereignty. For example, if a single firm dominates an industry that firm may start to dictate to consumers what they need such that the firm begins to resemble a communist state.

Attention Economics

Attention economics is a market for advertising and promotion that is designed to attract consumer attention and to influence their perceptions.

Conspicuous Consumption

Conspicuous consumption is consumption driven by a desire for social status such as respect, coolness or youth.

Conspicuous Conservation

Conspicuous conservation is consumption or donations driven by a desire to be a good person or to be perceived as such.

Commoditization of the Human Experience

Commoditization of the human experience is the tendency for consumers to seek products and services that fulfill their needs for experience in areas such as connectedness, respect, safety, adventure and self-fulfillment. For example, a consumer who seeks respect by purchasing a luxury handbag as opposed to earning respect through their behavior and accomplishments.

Bounded Rationality

Bounded rationality is the theory that consumers are basically logical but often make irrational decisions due to a lack of information or time to invest in decision making.

Consumer Protection

Due to bounded rationality, consumers benefit from a number of protections such as basic safety regulations for toys. Technically, these may limit consumer sovereignty but may have the effect of improving choices available to consumers as opposed to restricting them. For example, requiring harmful substances to be labeled on products may result in more products on the market that avoid these substances.

Laws & Regulations

In practice, consumer sovereignty is always limited by laws and regulations designed to prevent economic bads such as destruction of the environment, harm to people or reduction of quality of life. For example, a consumer who wants a soup made from an endangered species may not be able to make this purchase due to basic laws that protect ecosystems.


Sovereignty always has limits as the sovereignty of one person may interfere with the sovereignty of another. For example, one person wants to enjoy a beautiful beach and another wants to pave it to make a parking lot. Governments play a role in setting basic rules that prevent consumer sovereignty from becoming an overly destructive force.
Overview: Consumer Sovereignty
The principle that people have the authority to make their own purchasing decisions.
Limits to Sovereignty
Monopolies and anti-competitive practices.
Related Concepts

Behavioral Economics

This is the complete list of articles we have written about behavioral economics.
Agency Cost
Attention Economics
Bounded Rationality
Consumer Economics
Consumer Economy
Free Riding
Herd Behavior
Rational Choice
Wealth Effect
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