The Effect of Social Cues on Marketing Decisions

Abstract

We address the question as to what extent individuals, when given information in marketing polls on the decisions made by the previous Nr individuals questioned, are likely to change their original choices. The processes can be formulated in terms of a Cost function equivalent to a Hamiltonian, which depends on the original likelihood of an individual making a positive decision in the absence of social cues p0; the strength of the social cue J; and memory size Nr . We find both positive and negative herding effects are significant. Specifically, if p0 > 1/2 social cues enhance positive decisions, while for p0 < 1/2 social cues reduce the likelihood of a positive decision.

Keywords: Marketing; Non-Markovian processes; Econophysics