Alternative Descriptions of Consumer Behaviour

Question 1

What is optimal/rational?

Answer 1

By definition, the optimal choice gives the highest possible utility. In order to determine the optimal choice, we need complete information about preferences and goods and the ability to make all of the comparisons.

The environment in which we make our choices is characterized by incomplete information, uncertainty, finite time and limited cognitive capability.

Question 2

Procedural Rationality (what is it)

Answer 2

A decision-maker is procedurally rational if they make decisions in a
manner that is practicable in the environment in which they are
acting and which tends to produce better outcomes than alternative
methods, in that environment.

Question 3

What is a heuristic?

Answer 3

A heuristic is a decision-making strategy/method which ignores some available information, with the goal of making decisions more quickly, frugally (simple and plain and costing little) and/or accurately than more complex methods.

Question 4

Sequential/Hierarchical (what is it and what 3 factors can influence this theory)

Answer 4

Rather than considering all consumption options at once, people might split the options into sub-groups and then make a decision just about the most important sub-group first, then so on.

• Necessities and luxuries
• Reference/comparison
• Conspicuous consumption/status goods

Question 5

Social default meaning

Answer 5

In many circumstances, most people do what most people do as it takes less effort

Question 6

Satisficing (what is it?)

Answer 6

Consumption behaviour is goal-directed (people don’t just buy things at random), but perhaps people aim not for the maximum, but rather ‘good enough’.