How much to purchase? - A cognitive adaptive decision making account
- Percy Mistry, University of California Irvine, Irvine, California, United States
AbstractRepeated purchase decisions often violate assumptions of standard economic or rational choice models, such as demonstrating asymmetric or unstable responses to changes in underlying policy, price, or tax variables. I propose a novel framework for how such decisions can be interpreted through the lens of a cognitive process model. This provides psychologically interpretable characterizations of individuals or population groups. It incorporates mental accounting, hedonic adaptation, confirmation bias, and the influence of perceived trust and fairness. It shows how sequential experiences and contextual aspects such as political affiliation, are mediated by this cognitive process to produce evolving consumption patterns. This novel approach can account for empirically observed violations of conventional choice models. The model is quantitatively fit to experimental data for individual purchase decisions and demonstrates improved descriptive, predictive, and inference capabilities. A proof-of-concept analysis using this model to account for real world consumption trends is also demonstrated.
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