...Introduction The theory of bounded rationality is one that been a cause for discussion in economist circles around the world for many years. The theory, originally coined by Hebert Simon surrounded the limitation of humans to process the amount of information available to make a logical, economic decision and the consumer would therefore, settle for something that satisfyingly sufficient, or ‘satisfice’(Simon 1955). Furthermore, the theory expanded over time to also include mans use of heuristics to simplify cognitive effort in the decision making process (Simon and Newell 1972) and it was argued that ‘logical and economic’ decisions were never reached by humans due to emotions and judgement controlling the decision making process and causing a range of biases and errors (Tversky and Kahneman 1986). The theory identified that humans would use these heuristics, such as rule of thumb or an estimation, to find something that is satisfactory to their needs rather than making the ideal economic decision. I agree with the notion that the world is ‘too complex for people to solve problems by employing strict logical rules and comprehensive thought processes’ (Simon 1955) and am also of the belief that humans will rely on heuristics to make the cognitive process more straightforward. Rational Consumer Choice Rational consumer choice theory has been around for many years and stems from the ideal that consumers act in a ‘rational’ fashion when making economic decisions. Not as...
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...Virtue, deontological, and utilitarianism theories have similarities and differences. Each theory relates to morals and ethics in precise ways, just as virtue, values, and morality have a precise relationship with one another. Virtue theory relates to ethics by identifying the character of a person as honorable, dependable, loyal, honest, or as untrustworthy, deceiving, careless, or self-serving. Basically a person is described as “good” or “bad”, or a mixture of both. People develop character throughout life as a mirror image of his or her morals. Virtue ethics define a person’s character more so than his or her actions. The downside of this theory is that it does not make allowance for good people who make bad mistake (Garrett, 2005). A teenager may give into peer pressure to steal a car. The teen may have high morals and ethics, but made a foolish decision. Virtue theory defines the teen as a bad person rather than as a good person who did a bad act. The next ethical theory, utilitarianism, focuses on determining the choice for the actions and the choice made depends on the course of action that has the best consequences for that person. The actions of a person are believed to be morally correct or incorrect based only on the outcome of the actions. Therefore, if the result is good, the action is morally right. On the other hand, if the result is bad, then action is morally wrong. People that follow the utilitarianism ethical theory, “the important consequences are obvious:...
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...adaptable and opportunistic ongoing process Name: Institution: Course: Tutor: Date: Identify and discuss how holiday decision-making as described in the case, is different from the traditional problem-solving models of consumer decision-making Holiday decision-making process is different from the traditional problem-solving models of consumer decision making. This is because holiday decision-making model does not require fixed sequential stages that are required by traditional problem-solving models. Administrative factors play an imperative role when deciding time and choice of holiday decision-making process (Schermerhorn & Osborn, 2011). The typical factors that mostly influence the holiday decision-making process are levels of involvement, situational factors, anticipation, nostalgia and daydreaming. On the other hand, this is very different from traditional decision-making process that is well sequentialized and structured. In this model, the need for a specific service or product is identified and information search and other alternatives are evaluated. The consumer is further led towards purchasing a product and there after placing a purchase evaluation (Moore & Simmons, 2010). In the traditional consumer decision-making, the method of searching for information is well structured and it is either external, internal or both of them. Information collection process in the holiday decision making is an ongoing and continuous process. The information...
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...Utility means satisfaction which consumers derive from commodities and services by purchasing different units of money.From Wikipedia, the free encyclopedia “Ineconomics, utility is a measure of satisfaction;it refers to the total satisfaction received by a consumer from consuming a good or service. “Given this measure, one may speak meaningfully of increasing or decreasing utility, and thereby explain economic behavior in terms of attempts to increase one's utility. Utility is often affected by consumption of various goods and services, possession of wealth and spending of leisure time. According to Utilitarian’s, such as Jeremy Bentham (1748–1832) and John Stuart Mill (1806–1873), theory “Society should aim to maximize the total utility of individuals, aiming for "the greatest happiness for the greatest number of people". Another theory forwarded by John Rawls (1921–2002) would have society maximize the utility of those with the lowest utility, raising them up to create a more equitable distribution across society. Utility is usually applied by economists in such constructs as the indifference curve, which plot the combination of commodities that an individual or a society would accept to maintain at given level of satisfaction. Individual utility and social utility can be construed as the value of a utility function and a social welfare function respectively. When coupled with production or commodity constraints, under some assumptions, these functions can be used to analyze...
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...who will adopt electric vehicles? a segmentation approach of UK consumers Dr Jillian anable The Centre for Transport Research University of aberdeen St Mary’s, Elphinstone Road aberdeen, UK, ab24 3Uf j.anable@abdn.ac.uk Dr geertje Schuitema Department of Marketing and Statistics aarhus University haslegaardsvej 10 DK-8210 aarhus V, Denmark g.Schuitema@asb.dk Dr Stephen Skippon Shell global Solutions Shell Technology Centre Thornton P.o. box 1 Chester, UK, Ch1 3Sh steve.skippon@shell.com Dr neale Kinnear Transport Research laboratory Crowthorne house, nine Mile Ride wokingham, UK, Rg40 3ga nkinnear@trl.co.uk Keywords electric vehicles, consumer preferences, segmentation two-wave design was aimed at reducing psychological distance, supporting information transfer into long-term memory, and facilitating non-conscious processing, thus better representing consumer choice processes. Applying cluster analysis to the various attitudinal measures, participants are segmented according to their pro-social and technology-oriented inclinations and some conclusions as to the characteristics of EV consumers are presented. Abstract Climate change programmes around the globe are relying heavily on the electrification of transport, especially private battery electric vehicles and plug-in hybrids (‘EVs’). These are novel technologies of which mainstream consumers have very little experience and knowledge, so they are psychologically distant from the category. This presents...
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...OF INFORMATION SYSTEMS/MASTER OF INFORMATION TECHNOLOGY COURSE: 7112ICT RESEARCH METHODS IN INFORMATION TECHNOLOGY INTRODUCTION The economics of switching costs and network effects have achieved a significant amount of popular, as well as professional attention in the last few decades. It is presently defined as the core factor for new Information Technology economy. Switching costs originates, if a consumer demands a product, or its related accessories(hardware or software), of his own purchases to be compatible with each other this creates economies of scope among his purchases from a single supplier. Whereas network effects arise when a user wants his system to be compatible so that s/he can interact or trade with other users, or switch to the same compatible system, which leads to the creation of economies of scope between different incompatible products. Thus these economies of scope impacts the consumer’s buying and switching behavior between various products. The state of lock-in arises when the switching cost is sufficiently high so that the consumer proceeds using the same product rather than switching to the different product. Lock in is the state where the cost of switching exceeds the benefits of switching. Economics of switching costs is the summation of various types of switching costs including: compatibility costs (and their relationship to network effects), contractual costs, transaction costs, search costs, learning costs, uncertainty costs and shopping...
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...the relationship between consumer needs and what is readily available in the market. The inherent relationship between the price of a good and the relative amount of that good consumers will demand is the fulcrum of recognizing demand curves in the broader context of consumer choice and purchasing behavior. Generally speaking, normal goods will demonstrate a higher demand as a result of lower prices and vice versa. Giffen goods are a situation where the income effect supersedes the substitution effect, creating an increase in demand despite a rise in price. Neutral goods, unlike Giffen goods, demonstrate complete ambivalence to price. That is to say that consumer swill pay any price to get a fixed quantity. The consumer equilibrium condition determines the quantity of each good the individual consumer will demand. The example illustrates, the individual consumer's demand for a particular good—call it good X—will satisfy the law of demand and can therefore be depicted by a downward‐sloping individual demand curve. The individual consumer, however, is only one of many participants in the market for good X. The market demand curve for good X includes the quantities of good X demanded by all participants in the market for good X. The market demand curve is found by taking the horizontal summation of all individual demand curves. For example, suppose that there were just two consumers in the market for good X, Consumer 1 and Consumer 2. These two consumers have different individual...
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...ASSIGNMENT Gorn, Gerald J., The effects of Music in Advertising on Choice Behavior: A Classical Conditioning Approach, Journal of Marketing 46:1 (1982:Winter) p.94 Summary of Gorn, Gerald J., The effects of Music in Advertising on Choice Behavior: A Classical Conditioning Approach, Journal of Marketing 46:1 (1982:Winter) p.94 The research conducted by Gerald J. Gorn is connected with Consumer Behavior through the general topic of learning: how do consumers’ behavior can be influenced by experience. In this case experience can be assimilated with music during advertising or more generally sensory features, which leads us more in depth of the Behavioral Learning Theories that emphasizes the learning process that occurs as consumers are facing external events. Its is to say do these external factors such as music during advertising influence the attention and the process of information, or do they directly takes part of the forming attitude process. Then we can especially focus on the Classical conditioning approach and effects on attitude (if there is) as Gerald J. Gorn does in his research. But before explaining the theory, on which the research is based, let focus on its objectives. As explained earlier, the purpose of the two experiments are to demonstrate if there is a scientific connection between the sensory features added to information in an advertisement and the attitude(s) and preference(s) shaped toward the attitude...
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...distinctions between things such as styles, manners, consumer goods and works of art and relating to these * Preference involves a choice between options. Consumer preferences represent each individual's desires for goods and services, which translate to choices based on income or wealth combined with the consumer's time to define consumption activities. Example: I have a taste for good wine. I have a preference (choose) for Cabernet over Merlot. KEY POINTS * Changes in taste lead to increased or decreased demand, which is one factor that economists consider when looking at changes in demand. * Consumer choice is a theory in microeconomics that connects preferences for goods and services to consumption expenditures and, therefore, consumer demand curves. TERMS * budget constraint The condition that constrains expenditure to income (for a person) or the value of exports to imports (for a state) Full text Consumer Preferences Consumer choice is a microeconomic theory connecting preferences for consumption goods and services to consumption expenditures. Consumer choice ultimately affects consumer demand curves. The link between personal preferences, consumption, and demand curves is one of the most closely studied relations in economics. Consumer choice theory is a way of analysing how consumers may achieve an equilibrium between their preferences and expenditures by maximizing utility as subject to consumer budget constraints. Preferences represent individual...
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...VALUE TO MARKETERS ABOUT UNDERSTANDING CONSUMER BEHAVIOR THEORIES AND CONCEPTS Modern day’s business is controlled by Consumers. Large variations in consumer needs and strong competition demands market driven business and marketing plans. It’s the response of Consumers that decides the success of Marketing. Most of the marketers not only avoid theories but also consider them to be irrelevant. They believe that huge experience of Managerial facts and direct observation of consumer’s behavior is enough to succeed. What marketers fail to understand is that experience and observation on one hand and theories on the other hand are inter-linked. By understanding consumer behavior, marketers will be able to investigate and learn consumer’s purchase mannerism and make marketing decisions. 1. INTERNAL INFLUENCES: These are the factors that happen within the consumers. 1.1. LEARNING: Learning is the behavioral change occurring due to the outcome of past experience. Based on Consumers gained experience on purchased and consumed product, they learn about the brands they like and dislike and the qualities they prefer the most. With this experience consumers adjust their behavior for the future. For marketers to understand the learning behavior better, two thoughts are developed – The behaviorist and the cognitive. 1.1.1. Behaviorist Learning Theory: This Theory is concerned with observing changes in an individual’s responses as a result of exposure to stimuli. (Henry...
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...The CE is founded on neoclassical micro-economic consumer theory. It assumes that consumers are highly rational decision makers who seek to optimize their utility by selecting the best option among the available alternatives, subject to constraints such as time and income (Ben-Akiva & Lerman 1985). So, a consumer makes a decision by evaluating the costs and benefits of the given alternatives, and selects among them which yields the highest utility to him/her (benefits-cost). In the CE, the choice is discrete in nature (Hanemann 1984), that is, only one alternative from the given choice set can be selected. Therefore, it is also known as discrete choice experiment (DCE). The alternative j will be chosen over some option g, if expected utility for individual, i , (Uij) exceeds the expected utility (Uig) for all alternatives. This implies that the probability of selecting an option is likely to increase with utility from the option and probability (P) that individual, I, will choose option j over other options g in a complete choice set R, is given by: P (jC) = P{ (Uij >Uig, s.t. g Є R, and j ≠g)} (2) Usually, in non-market valuation studies using CE model, respondents are given a choice card containing three alternatives including status-quo (current situation) to select. These alternatives in the choice set are outcomes of policies or programs related to the problem being investigated and distinguished by different levels. The levels could be either qualitative or...
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...Consumer Behavior Models in Tourism Analysis Study Muhannad M.A Abdallat, Ph.D. Assistant Professor Hesham El –Sayed El - Emam, Ph.D. Assistant Professor Department of Tourism and Hospitality, Faculty of Tourism and Archeology King Saud University ABSTRACT The theories of consumer decision-making process assume that the consumer’s purchase decision process consists of steps through which the buyer passes in purchasing a product or service. However, this might not be the case. Not every consumer passed through all these stages when making a decision to purchase and in fact, some of the stages can be skipped depending on the type of purchases. The reasons for the study of consumer’s helps firms and organizations improve their marketing strategies by understanding issues such as: • The psychology of how consumers think, feel, reason, and select between different alternatives (e.g., brands, products); • The psychology of how the consumer is influenced by his or her environment (e.g., culture, family, signs, media); • The behavior of consumers while shopping or making other marketing decisions; • Limitations in consumer knowledge or information processing abilities influence decisions and marketing outcome; • How consumers’ motivation and decision strategies differ between products, that differ in their level of importance or interest that they entail for the consumer; and • How marketers can adapt and improve their marketing campaigns and marketing strategies...
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...common opinion is that rational choice and action is determined by the final reward that can be gained, such as money or approval. If this is non-existent, interaction with a person will end and the self-centred individuals will seek other more ‘profitable’ exchanges. Scott points out however, that this excludes society’s associative behaviour which rational theorists have attempted to explain as an individual’s cunning ‘rational strategy’ and that potentially ‘moral force overrides self-interest’ through guilt. This is alike Haigh’s argument that institutions limit the contingent nature of making a choice (Haigh: 2012). I believe Scott’s text will be beneficial to my research more so than Haigh’s as his article references the rational choice theorists (Blau, Coleman, Elster) who have embraced and tried to decipher the contradiction in rational choice theory rather than simply conclude it is a limitation. In saying this, Scott’s discussion is centred around individual rational choice and not on a bureaucratic level which is holds greater significance for the discussion of nuclear energy policy in Japan. van den Bergh, J., Ferrer-i-Carbonell, A. and Munda, G. (2000) ‘Alternative models of individual behaviour and implications for environmental policy’,...
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...Consumer Behavior Models in Tourism Analysis Study Muhannad M.A Abdallat, Ph.D. Assistant Professor Hesham El –Sayed El - Emam, Ph.D. Assistant Professor Department of Tourism and Hospitality, Faculty of Tourism and Archeology King Saud University ABSTRACT The theories of consumer decision-making process assume that the consumer’s purchase decision process consists of steps through which the buyer passes in purchasing a product or service. However, this might not be the case. Not every consumer passed through all these stages when making a decision to purchase and in fact, some of the stages can be skipped depending on the type of purchases. The reasons for the study of consumer’s helps firms and organizations improve their marketing strategies by understanding issues such as: • The psychology of how consumers think, feel, reason, and select between different alternatives (e.g., brands, products); • The psychology of how the consumer is influenced by his or her environment (e.g., culture, family, signs, media); • The behavior of consumers while shopping or making other marketing decisions; • Limitations in consumer knowledge or information processing abilities influence decisions and marketing outcome; • How consumers’ motivation and decision strategies differ between products, that differ in their level of importance or interest that they entail for the consumer; and • How marketers can adapt and improve their marketing campaigns and marketing strategies...
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...making money. Therefore, this essay will apply standard consumer theory to the housing market and clarify the differences of the decision-making process in purchasing a residential dwelling between standard consumer choice theory and behavioral economics. Moreover, the specific characteristics of speculative bubbles in the real estate market in Spain before and during 2008-2012 will be examined. Part 1: Applications of Traditional vs. Behavioral Economics Explanations Consumer choice is about maximizing their satisfaction by using the limited incomes to fulfill their preference (Silberberg and Suen 2001, 252). There are few general assumptions about consumer’s preferences. Firstly, consumer can rank and compare their choices according to their preference. For example, they can decide to prefer residential dwelling to holiday activity, holiday activity to residential dwelling or indifferent between both choices. This is the assumption called completeness (Isaac 1998, 9). Secondly, preferences are transitive. It means that if a consumer prefers residential dwelling to holiday activity and holiday activity to car, then the consumer also prefers residential dwelling to car. Therefore, consumer consistency is necessary for transitivity. Thirdly, consumers usually prefer more goods to less because they are never satisfied and think that more is always better (Pindyck and Rubinfeld 2009, 70). Utility shows the satisfaction of consumer, and it is represented by indifference curves (Silberberg...
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