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Emotional Balances in Experimental Consumer Choice

Author

Listed:
  • Mengov, George
  • Egbert, Henrik
  • Pulov, Stefan
  • Georgiev, Kalin

Abstract

This paper presents an experiment, which builds a bridge over the gap between neuroscience and the analysis of economic behaviour. We apply the mathematical theory of Pavlovian conditioning, known as Recurrent Associative Gated Dipole (READ), to analyse consumer choices in a computer-based experiment. Supplier reputations, consumer satisfaction, and customer reactions are operationally defined and, together with prices, related to READ’s neural dynamics. We recorded our participants’ decisions with their timing, and then mapped those decisions on a sequence of events generated by the READ model. To achieve this, all constants in the differential equations were determined using simulated annealing with data from 129 people. READ predicted correctly 96% of all consumer choices in a calibration sample (n = 1290), and 87% in a test sample (n = 903), thus outperforming logit models. The rank correlations between self-assessed and dipole-generated consumer satisfactions were 89% in the calibration sample and 78% in the test sample, surpassing by a wide margin the best linear regression model.

Suggested Citation

  • Mengov, George & Egbert, Henrik & Pulov, Stefan & Georgiev, Kalin, 2008. "Emotional Balances in Experimental Consumer Choice," MPRA Paper 56689, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:56689
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    File URL: https://mpra.ub.uni-muenchen.de/56689/1/MPRA_paper_56689.pdf
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    References listed on IDEAS

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    1. DiClemente, Diane F. & Hantula, Donald A., 2003. "Applied behavioral economics and consumer choice," Journal of Economic Psychology, Elsevier, vol. 24(5), pages 589-602, October.
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    Cited by:

    1. Mengov, George & Georgiev, Nikolay & Zinovieva, Irina & Gerunov, Anton, 2022. "Virtual social networking increases the individual's economic predictability," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 101(C).

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    More about this item

    Keywords

    Consumer behaviour; Decision making; Gated dipole; READ; Satisfaction; hedonic treadmill;
    All these keywords.

    JEL classification:

    • C45 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Neural Networks and Related Topics
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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