Rules for closing open minds
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Put online January 2010
This text is from Notes on the Heterodox Economics of Consumer Choice, adapted from Peter Earl & Tim Wakeley (2005) Business Economics: a Contemporary Approach (ISBN 9780077103927). The full document can be found in the Heterodox Economics education wiki in the Other/ miscellaneous section. Released under a JISC Open Educational Licence.
The demand for product characteristics view of choice, from the mainstream literature, sees the consumer as having a set of preferences in which there are tradeoffs between product characteristics. Behavioural/evolutionary economists take a rather different approach. They suggest that the consumer brings into play not a set of preferences but an evolving set of decision rules. These decision rules may take very different forms not merely between consumers in regard to a given class of products, but between different classes of products chosen by a single consumer. Examples could include:
- Rely upon the opinion of a seemingly knowledgeable friend.
- Follow the recommendation of ‘best buy in its class’ from a consumer magazine.
- Choose the product in the class in question offered by a manufacturer with whom one has previously had a trouble-free consumption experience, and if there are several brands that come into this category, choose the cheapest (or, perhaps, choose the one with the highest social standing, subject to it coming into one’s budget range).
- Choose the cheapest of those products that offer enough of all the required features on one’s current checklist for this type of product.
- Take one’s current checklist of desired product characteristics, rank them in order of priority and then choose the product that gets furthest along the priority listing before it fails to match up to a required standard.
- Choose the product that has the longest list of non-core features, so long as it has all of the core features on one’s checklist.
- Form an overall rating of rival products by averaging their performances (say, out of ten) on each dimension of interest, and then choose the one with the highest overall score.
- Choose the product with the best performance in a particular, single dimension.
- Choose the top-selling product in the category.
- Choose the underdog brand on the basis that they must be trying harder and could therefore be under-rated.
This list is by no means exhaustive. Note that several rules may be used in combination, as with rules that are only bought into operation where there is a tie for first place, or where nothing is deemed good enough in terms of an initial rule. Note also that some rules may entail a mixture of intolerance (absolute requirements for particular kinds of performance) and willingness to make trade-offs between other dimensions.
Knowledge of the different forms that selection rules can take is especially useful in relation to the design of market research questionnaires or data derived from them. For example, if consumers have been asked to ‘rank product features in order of priority’, a mainstream economist would see their answers as saying something about the relative weights attached to the product’s features. On this basis, a particular product may still achieve the highest score even if it performs poorly in a ‘high priority’ area, because it does really well in ‘low priority’ areas. However, from the heterodox viewpoint, the consumer may actually be thinking hierarchically, so that if the product fails to pass a high priority test it is out of the running altogether, regardless of how well it performs in respect of lower priority tests.