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Consumer Choice as Constrained Imitation

Author

Listed:
  • Itzhak Gilboa

    (HEC, Paris, and Tel-Aviv University)

  • Andrew Postlewaite

    (Department of Economics, University of Pennsylvania)

  • David Schmeidler

    (Tel-Aviv University, the Ohio State University, and the InterDisciplinary Center at rzliya)

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.

Suggested Citation

  • Itzhak Gilboa & Andrew Postlewaite & David Schmeidler, 2015. "Consumer Choice as Constrained Imitation," PIER Working Paper Archive 15-013, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    • Handle: RePEc:pen:papers:15-013
    as

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    File URL: https://economics.sas.upenn.edu/sites/default/files/filevault/15-013.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Imitation; case-based decisions; rules of thumb; Consumer choice; complexity;
    All these keywords.

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory

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