Rational choice and bounded rationality

Abstract

This chapter presents a brief exposition of consumer decision making. It begins by emphasizing the two major forces that frame consumer decisions, namely, the goals humans strive to attain in the marketplace and the resources they have to exchange for goods and services that achieve those goals. Decision-making describes how consumers make their choices. A variety of theories explains these choice procedures. The starting point is a purely rational model (homo economicus) that optimizes the exchange of resources for goods. Alternatives to this model include bounded rationality and the heuristics and biases approach. Some models emphasize the roles of emotion in consumer decision making, while others view decision making as a biological phenomenon or a stimulus/response phenomenon. Overall, one must conclude that no single model or theory accounts for all consumer decision making, and that there must be some truth in each of them. The chapter concludes with speculations regarding the future of decision-making. “Logic: The art of thinking and reasoning in strict accordance with the limitations and incapacities of the human misunderstanding.” Ambrose Bierce “The heart has its reasons, of which reason knows nothing.” Blaise Pascal