Thick Indifference Curves, Marketing and Behavioral Economics

David Gordon, Richard Vaughan

Abstract


In this paper the differences between two schools of thought, the traditional school and the behavioral economics school, are discussed. The relatively new behavioral economics school is a blend of psychology and economics. The conventional assumptions concerning consumer preferences are explicated and elaborated upon. The assumptions include reflexivity, completeness, transitivity and continuity. Secondary assumptions, such as local nonsatiation and strict convexity, regarding preferences are also explained. Thick indifference curves in a two good world are explained and demonstrated to encompass rational behavior even though they do not reflect a well defined utility function. If a consumer has preferences that exhibit thick indifference curves behavioral economists can be mistaken in thinking that consumer behavior is irrational. The role that marketing plays in forming thick indifference curves is also established.


Keywords


Indifference curves; behavioral economics; marketing

Full Text:

PDF

References


Blume, L., Brandenburger, A., Dekel, E. (1991). Lexicographic Probabilities and Choice Under Uncertainty. Econometrica, 59(1), 61 – 79.

Champniss, G, Wilson, H., McDonald, E. (2015). Why Your Customers’ Social Identities Matter. Harvard Business Review, January – February.

Chatterjee, K., Krishna, R. V. (2006). A Geometric Approach to Continuous Expected Utility. Economic Letters, 98(1), 89 – 94.

Cialdini, E. (2006). Influence: The Psychology of Persuasion. Revised Edition. Harper Business.

Debreu, G. (1954). Representation of a Preference Ordering by a Numerical Function. Decision Process. Thrall, Davis and Coombs, editors. John Wiley. New York, NY.

Dekel, E. (1986). An Axiomatic Characterization of preferences Under Uncertainty: Weakening the Independence Axiom. Journal of Economic Theory, 40(2), 304 – 318.

DellaVigna, S., Malmendier, U. (2009). Psychology and Economics: Evidence from the Field. Journal of Economic Literature, 47(2), 315 – 372.

Fishburn, P., (1974). Lexicographic Orders, Utilities and Decision Rules: A Survey. Management Science, 20(11), 1442 – 1471.

Fishburn, P., (1975). Axioms of Lexicographic Preferences. Review of Economic Studies, 42(3), 415 – 419.

Henderson, J., Quandt, R., (1980). Microeconomic Theory: A Mathematical Approach. 3rd ed. McGraw – Hill.

Kahneman, D. (2011). Thinking, Fast and Slow. Farrar, Straus and Giroux.

Knoblauch, V. (2000). Lexicographic Orders and Preference Representation. Journal of Mathematical Economics, 34(2), 255 – 267.

Kohli, A., Jedidi, K. (2007). Representation and Inference of Lexicographic Preference Models and their Variants. Marketing Science, 26(3), 380 – 399. doi: 10.1287/mksc.1060.0241

Nurmi, H. (1981). A Fuzzy Solution to a Majority Voting Game. Fuzzy Sets and Systems, 5(1), 187 – 198.

Silberberg, E., Suen, W. (2000). The Structure of Economics: A Mathematical Analysis. 3rd ed. W. W. Norton and Company.

Singh, S. (2006). Impact of Color on Marketing. Management Decision, 44(6), 783 – 789.

Subramanian, S., (2010). Liberty, Equality and Impossibility: some general results in the space of “soft” preferences. Journal of Economic Policy Reform, 13(4), 325 – 341.

Tajfel, H., Turner J. (1986). The Social Identity Theory of Intergroup Behavior. Psychology of Intergroup Relations, 7-24.

Thaler, R. (2015). The Making of Behavioral Economics: Misbehaving. W. W. Norton, New York, NY.

Varian, H. (1992). Microeconomic Analysis. 3rd ed. W. W. Norton and Company.


Refbacks

  • There are currently no refbacks.


Copyright (c) 2017 Journal of Progressive Research in Social Sciences

Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

Copyright © 2014 Journal of Progressive Research in Social Sciences. All rights reserved.

ISSN: 2395-6283.

For any help/support contact us at editorial@scitecresearch.com, jprsseditor@scitecresearch.com.