Behaviorally informed consumer policy

Research and policy for “humans”

Authored by: Lucia A. Reisch , John B. Thøgersen

Routledge Handbook on Consumption

Print publication date:  February  2017
Online publication date:  February  2017

Print ISBN: 9781138939387
eBook ISBN: 9781315675015
Adobe ISBN: 9781317380900

10.4324/9781315675015.ch21

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Abstract

Consumer policy has long been based on a view of the consumer as a rational homo oeconomicus who actively engages in a search for the best available product/service option, knows and considers all cost and benefits and follows her true preferences. In this view, consumer behavior is largely determined by individual preference orders (based on information provided and prior learning) and individual income, as well as the goods and prices available. The formal economic model expressing this approach is essentially a constrained optimization situation for a set of considered consumption bundles. It does account for some factors that influence choices beyond prices, primarily time (current availability), other goods (opportunity costs), and consumption circumstances (including diminishing marginal utility); yet it assumes that attitudes, values, social norms, and other mental representations are all included in a consumer’s preferences (Thaler, 1980). While such consumption models recognize potential “anomalies” – such as bandwagon or cascade effects, Veblen effects, habits, addiction, limited information processing – they assume that the human biases and heuristic strategies that have been identified in empirical consumer research and the specific choice situations are generally “irrelevant” and can hence be neglected (Reisch & Sunstein, 2015). However, as we will see, this is not a helpful assumption for the real world; empirical studies have shown that these “supposedly irrelevant factors” (SIFs) (Thaler, 2015) are – quite to the contrary – rather decisive (Halpern, 2015).

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