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Deployment of the Microeconomic Consumer Theory in the Artificial Neural Networks Modelling: Case of Organic Food Consumption

Author

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  • Ivan Jajić

    (Faculty of Economics and Business, University of Zagreb, 10000 Zagreb, Croatia)

  • Tomislav Herceg

    (Faculty of Economics and Business, University of Zagreb, 10000 Zagreb, Croatia)

  • Mirjana Pejić Bach

    (Faculty of Economics and Business, University of Zagreb, 10000 Zagreb, Croatia)

Abstract

Organic food consumption has become a significant trend in consumer behaviour, determined by various motives, among which the price does not play a major role, thus reflecting the Lancaster approach to the microeconomic consumer theory. Additionally, artificial neural networks (ANNs) have proven to have significant potential in providing accurate and efficient models for predicting consumer behaviour. Considering these two trends, this study aims to deploy the Lancaster approach in the emerging area of artificial intelligence. The paper aims to develop the ANN-based predictive model to investigate the relationship between organic food consumption, demographic characteristics, and health awareness attitudes. Survey research has been conducted on a sample of Croatian inhabitants, and ANN models have been used to assess the importance of various determinants for organic food consumption. A Three-layer Multilayer Perceptron Neural Networks (MLPNN) structure has been constructed and validated to select the optimal number of neurons and transfer functions. One layer is used as the first input, while the other two are hidden layers (the first covers the radially symmetrical input, sigmoid function; the second covers the output, softmax function). Three versions of the testing, training, and holdout data structures were used to develop ANNs. The highest accuracy was achieved with a 7-2-1 partition. The best ANN model was determined as the model that was showing the smallest percent of incorrect predictions in the holdout stage, the second-lowest cross-entropy error, the correct classification rate, and the area under the ROC curve. The research results show that the availability of healthy food shops and consumer awareness of these shops strongly impacts organic food consumption. Using the ANN methodology, this analysis confirmed the validity of the Lancaster approach, stating that the characteristics or attributes of goods are defined by the consumer and not by the product itself.

Suggested Citation

  • Ivan Jajić & Tomislav Herceg & Mirjana Pejić Bach, 2022. "Deployment of the Microeconomic Consumer Theory in the Artificial Neural Networks Modelling: Case of Organic Food Consumption," Mathematics, MDPI, vol. 10(17), pages 1-21, September.
    • Handle: RePEc:gam:jmathe:v:10:y:2022:i:17:p:3215-:d:907541
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    References listed on IDEAS

    as
    1. Kelvin J. Lancaster, 1966. "A New Approach to Consumer Theory," Journal of Political Economy, University of Chicago Press, vol. 74(2), pages 132-132.
    2. Hwanseok Seo & Jaehyun Hwang, 2022. "Analysis of Decisive Elements in the Purchase of Alternative Foods Using Bivariate Probit Model," Sustainability, MDPI, vol. 14(7), pages 1-12, March.
    3. Hendler, Reuven, 1975. "Lancaster's New Approach to Consumer Demand and Its Limitations," American Economic Review, American Economic Association, vol. 65(1), pages 194-199, March.
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