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Consumer Preference Axioms: Behavioral Postulates for Describing and Predicting Stochastic Choice

Author

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  • John R. Hauser

    (Northwestern University)

Abstract

This paper draws on econometrics, von Neumann-Morgenstern utility theory, stochastic choice theory, and consumer behavior to develop five basic axioms or postulates of stochastic choice behavior. These axioms imply the existence and uniqueness of a preference function which identifies how consumers evaluate products in terms of product attributes. The preference function produces a scalar goodness measure for each product in a consumer's choice set. These goodness measures then predict choice probabilities for each product in a consumer's choice set. The advantage of these axioms is that they extend the strengths of von Neumann-Morgenstern theory to stochastic choice and make possible the determination of consistent choice probabilities.

Suggested Citation

  • John R. Hauser, 1978. "Consumer Preference Axioms: Behavioral Postulates for Describing and Predicting Stochastic Choice," Management Science, INFORMS, vol. 24(13), pages 1331-1341, September.
  • Handle: RePEc:inm:ormnsc:v:24:y:1978:i:13:p:1331-1341
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    File URL: http://dx.doi.org/10.1287/mnsc.24.13.1331
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    References listed on IDEAS

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    1. Jacob A. Mincer & Victor Zarnowitz, 1969. "The Evaluation of Economic Forecasts," NBER Chapters,in: Economic Forecasts and Expectations: Analysis of Forecasting Behavior and Performance, pages 3-46 National Bureau of Economic Research, Inc.
    2. N/A, 1962. "Summary," National Institute Economic Review, National Institute of Economic and Social Research, vol. 19(1), pages 3-3, February.
    3. N/A, 1962. "Summary," National Institute Economic Review, National Institute of Economic and Social Research, vol. 20(1), pages 3-3, May.
    4. N/A, 1962. "Summary," National Institute Economic Review, National Institute of Economic and Social Research, vol. 21(1), pages 3-3, August.
    5. J. G. Cragg & Burton G. Malkiel, 1968. "The Consensus And Accuracy Of Some Predictions Of The Growth Of Corporate Earnings," Journal of Finance, American Finance Association, vol. 23(1), pages 67-84, March.
    6. N/A, 1962. "Summary," National Institute Economic Review, National Institute of Economic and Social Research, vol. 22(1), pages 3-3, November.
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    Citations

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    Cited by:

    1. Jordan J. Louviere, 2013. "Modeling single individuals: the journey from psych lab to the app store," Chapters,in: Choice Modelling, chapter 1, pages 1-47 Edward Elgar Publishing.
    2. John R. Hauser & Steven Shugan, 1978. "Intensity Measures of Consumer Preferences," Discussion Papers 291, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    3. Manrai, Ajay K., 1995. "Mathematical models of brand choice behavior," European Journal of Operational Research, Elsevier, vol. 82(1), pages 1-17, April.
    4. Kim Kaivanto & Eike Kroll, 2014. "Alternation bias and reduction in St. Petersburg gambles," Working Papers 65600286, Lancaster University Management School, Economics Department.

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