Abstract
According to Herbert Simon, traditional economic analysis rests on two basic assumptions. The first is that the economic agent has a specific goal; for the producer it is to maximise profits and for the consumer to maximise utility. The second assumption is that the economic agent, producer or consumer, is ‘substantively rational’ — that is, his behaviour is ‘appropriate to the achievement of given goals within the limits imposed by given conditions and constraints’.1
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Notes and References
H. Simon, ‘ From Substantive to Procedural Rationality’, in F Hahn and M. Hollis (eds.) Philosophy and Economic Theory (Oxford University Press, 1979 ) p. 67.
T. Scitovsky, The Joyless Economy: An Inquiry into Human Satisfaction and Consumer Dissatisfaction (Oxford University Press, 1976) p. xi.
A. R. Oxenfeldt, ‘Consumer Knowledge: its Measurement and Extent’, Review of Economics and Statistics, vol. XXXII (Oct. 1950) p. 300.
See K, Lancaster, ‘A New Approach to Consumer Theory’, Journal of Political Economy, vol. 74 (April 1966(a)); ‘Change and Innovation in the Technology of Consumption’, American Economic Review, vol. 56 (May 1966(b)); Consumer Demand: A New Approach (Columbia University Press, 1971 ).
See D. S. Ironmonger, Review of Lancaster, Consumer Demand, in Economica, vol. 42 (May 1975).
This example is based on Loren V. Geistfeld, ‘Consumer Decision Making: The Technical Efficiency Approach’, The Journal of Consumer Research, vol. 4 (June 1977).
K. Lancaster, Variety, Equity and Efficiency (Blackwell, 1979 ) p. 23.
R. Hendler, ‘Lancaster’s New Approach to Consumer Demand and its Limitations’, American Economic Review, vol. 65 (March 1975) p. 195 (emphasis added).
The most recent edition of Consumer Behavior by James Engel, Roger Blackwell and David Kollat, for example, identifies the following stages: problem recognition, search, alternative evaluation, choice and outcomes. See James F. Engel, Roger D. Blackwell and David T. Kollat, Consumer Behavior, (third edition) (The Dryden Press, 1978).
G. J. Stigler, ‘The Economics of Information’, Journal of Political Economy, vol. LXIX (June 1961).
See M. Porter, Interbrand Choice, Strategy and Bilateral Market Power (Harvard University. Press, 1976 )
and S. Rosen, ‘Advertising as Information’, in D. Tuerck (ed.), Issues in Advertising: The Economics of Persuasion ( American Enterprise Institute for Public Policy Research, Washington D.C., 1978 ).
M. Fishbein and I. Ajzen, Belief, Attitude, Intention and Behaviour: An Introduction to Theory and Research (Addison-Wesley, 1975).
James R. Bettman, An Information Processing Theory of Consumer Choice (Addison-Wesley, 1979 ).
William L. Wilkie and Edgar A. Pessemier, ‘Issues in Marketing’s Use of Multi-Attribute Models’, Journal of Marketing Research, vol. 10 (Nov. 1973).
Peter Wright, ‘Consumer Choice Strategies: Simplifying vs. Optimizing’, Journal of Marketing Research, vol. 12 (Feb. 1975).
In Consumer Demand (op. cit.) Lancaster does consider alternative utility functions, but in the main the non-linear compensatory model is adopted. Ironmonger’s book, in contrast, which also uses the characteristics framework, is based on a hierarchical structure of preferences with satiation levels. See D. S. Ironmonger, New Commodities and Consumer Behaviour (Cambridge University Press, 1972).
H. A. Simon, ‘Theories of Decision-Making in Economic and Behavioral Science’, in E. Mansfield (ed.), Micro-economics (W. W. Norton, 1971 ) p. 97.
R. Muth, ‘Household Production Functions and Consumer Demand Functions’, Econometrica, vol. 34 (July 1966).
See J. James and F. Stewart, ‘New Products: A Discussion of the Welfare Effects of the Introduction of New Products in Developing Countries’, Oxford Economic Papers, vol. 33 (March 1981).
See the discussion in Y. Kotowitz and F. Mathewson, ‘Advertising, Consumer Information and Product Quality’, Bell Journal of Economics, vol. 10 (Autumn 1979 ).
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© 1983 Jeffrey James
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James, J. (1983). Consumer Choice and Welfare. In: Consumer Choice in the Third World. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-06109-9_2
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