Alternative views of consumer behaviour
- Created by: roochiexoxo
- Created on: 09-10-17 21:27
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- 1.2.10 Alternative views of consumer behaviour
- The importance of habitual behaviour
- Habits represent short-cuts in decision making
- A rule of thumb is a quick way of assessing a situation that doesn't give an exact answer
- Consumers usually make decisions without gathering 100% of the information required
- Most decisions can be made without knowing all of the information
- Not worth the time and effort to gather all of the information sometimes
- Firms learn the habits of the consumers which they use to exploit
- Supermarkets place the high profits good on the eye level and the low profits goods on the top and bottom shelves
- Habits can become destructive in the form of addictions
- Those who are addicted to demerit goods have it in their long-term interests to control the addiction
- Most lack the self control to stop or limit the addiction
- Lack of self control leads to economic agents making decisions that do not maximise their benefits
- Most lack the self control to stop or limit the addiction
- Those who are addicted to demerit goods have it in their long-term interests to control the addiction
- Habits represent short-cuts in decision making
- Consideration of the influence of other people's behaviour
- Some people make choices based on social norms
- Beliefs that are held by a group of people about how to behave
- Example: a teenager asking their parents to buy them expensive branded trainers to fit in with their peers
- Some people make choices based on social norms
- Consumer weakness at computation
- Consumers may not always be willing or able to make comparisons between prices and different goods on offer
- Prices and offers are usually presented in a way that make it different for consumers to make mathematical comparisons
- Some firms deliberately exploit this weakness by presenting the data in a disjointed way or by not giving enough information for the consumers to make a rational choice
- Sometimes the individual prices of the multipack units are actually more expensive than the cost of the singular individual units
- Most consumers will not calculate the individual price of the multipack units due to the mental effort requirement
- Even though the neo-classical economists would theorise that the supermarkets would not sell the more expensive multipacks because the rational consumers would go for the cheaper individual goods
- Most consumers will not calculate the individual price of the multipack units due to the mental effort requirement
- The difference between rationality and behavioural economics
- Neo-classical economics assumes that consumers are rational by maximising their own utility or economic welfare
- Other economists argue that the homo-economicus presented by the neo-classical economics of economics is inaccurate
- Sometimes, economic agents like consumers are not rational because they may not go for the cheapest good due to their choices being manipulated by other factors
- The importance of habitual behaviour
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