Consumer Choice as Constrained Imitation

37 Pages Posted: 10 Mar 2015

See all articles by Itzhak Gilboa

Itzhak Gilboa

Tel Aviv University - Eitan Berglas School of Economics; HEC Paris - Economics & Decision Sciences

Andrew Postlewaite

University of Pennsylvania - Department of Economics

David Schmeidler

Tel Aviv University - Eitan Berglas School of Economics; Ohio State University (OSU)

Date Written: February 1, 2015

Abstract

A literal interpretation of neo-classical consumer theory suggests that the consumer solves a very complex problem. In the presence of indivisible goods, the consumer problem is NP-Hard, and it appears unlikely that it can be optimally solved by humans. An alternative approach is suggested, according to which the household chooses how to allocate its budget among product categories without necessarily being compatible with utility maximization. Rather, the household has a set of constraints, and among these it chooses an allocation in a case-based manner, influenced by choices of other, similar households, or of itself in the past. We offer an axiomatization of this model.

Keywords: Imitation, case-based decisions, rules of thumb, Consumer choice, complexity

JEL Classification: D11

Suggested Citation

Gilboa, Itzhak and Postlewaite, Andrew and Schmeidler, David, Consumer Choice as Constrained Imitation (February 1, 2015). PIER Working Paper No. 15-013, Available at SSRN: https://ssrn.com/abstract=2575806 or http://dx.doi.org/10.2139/ssrn.2575806

Itzhak Gilboa

Tel Aviv University - Eitan Berglas School of Economics ( email )

P.O. Box 39040
Ramat Aviv, Tel Aviv, 69978
Israel
972-3-640-6423 (Phone)
972-3-640-9908 (Fax)

HEC Paris - Economics & Decision Sciences

Paris
France

Andrew Postlewaite (Contact Author)

University of Pennsylvania - Department of Economics ( email )

Ronald O. Perelman Center for Political Science
133 South 36th Street
Philadelphia, PA 19104-6297
United States
215-898-7350 (Phone)
215-573-2057 (Fax)

HOME PAGE: http://www.econ.upenn.edu/~apostlew

David Schmeidler

Tel Aviv University - Eitan Berglas School of Economics ( email )

P.O. Box 39040
Ramat Aviv, Tel Aviv, 69978
Israel
+972-3-640-9643 (Phone)
+972-3-640-9357 (Fax)

Ohio State University (OSU) ( email )

Blankenship Hall-2010
901 Woody Hayes Drive
Columbus, OH OH 43210
United States

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