Endogenous Reactivity in a Dynamic Model of Consumer’s Choice

Ahmad Naimzada and Fabio Tramontana

Discrete Dynamics in Nature and Society, 2012, vol. 2012, 1-9

Abstract:

We move from a boundedly rational consumer model (Naimzada and Tramontana, 2008, 2010) characterized by a gradient-like decisional process in which, under particular parameters conditions, the asymptotical convergence to the optimal choice does not happen but it does under a least squared learning mechanism. In the present paper, we prove that even a less sophisticated learning mechanism leads to convergence to the rational choice and also prove that convergence is ensured when both learning mechanisms are available. The stability results that we obtain give more strength to the rational behavior assumption of the original model; in fact, the less demanding is the learning mechanism ensuring convergence to the rational behavior, the higher is the probability that even quite naive consumers will learn the composition of their optimum consumption bundles.

Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:hin:jnddns:908451

DOI: 10.1155/2012/908451

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