Consumer Choice as Constrained Imitation

Itzhak Gilboa, Andrew Postlewaite and David Schmeidler

PIER Working Paper Archive from Penn Institute for Economic Research, Department of Economics, University of Pennsylvania

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 (search for similar items in EconPapers)
JEL-codes: D11 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2015-02-01
New Economics Papers: this item is included in nep-mic and nep-upt
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