Factors Affecting Rational Choice

Topics: Rational choice theory, Rationality, Decision making Pages: 8 (2714 words) Published: November 15, 2011
Factors Affecting Rational Choice

Most consumer behavior analyses and programs seek to dig out consumers’ needs and wants, which direct their purchasing and decision behaviors. Consumer behavior and choice are complex, inherently dynamic and potentially affected by a number of factors. According to this, it seems that the rational choice theory should make some adjustments to be adopted to this increasingly more dynamic reality and marketing environment and thus set a realistic and stable base for consumer behavior analysis.

1. Brief introduction about rational choice theory
1.1 Rational choice theory as an economic notion
“Rationality” can also be substituted by other technical terms, such as utility, probability, product, optimization, equilibrium (Steven M. Shugan, 2006).The most common form of rational choice theory is similar with the notion of “Economic Man Model ”, which serves as the foundation for what has been termed the law-and-economics movement(Jacob Jacoby, 2000),but involves a plenty of unrealistic assumptions. The mainstream theory of rational choice simply defines "rationality" as a situation that an individual using all possible resource and information to make complex trade-off between cost and benefits in order to maximize and optimize their action results. When this theory is applied to consumer behavior, the result turns out to be that all consumers are supposed to be rational and are able to make full use of all available resource and information to maximize their consumption utility. This model has been repeatedly challenged, both for its assumptions and conclusions. An interesting saying is that if consumers really follow the rigorous rational decision-making steps when they go shopping, their entire life would be eventually spent on choosing and selecting and leave no time for enjoying the utilities of what they decide to purchase. 1.2 The principle of bounded rationality

Complete rationality requires consumers to possess boundless cognitive capabilities. Individuals are emotional sometimes even impulsive. Obviously, rational choice is an unrealistic concept and need to be amended to some extent. Researchers demanded a more practical and simple everyday terms for their theories, both to better communicate the intended concept, to look out consumers purchase models and assumptions appear more palatable (Steven M. Shugan, 2006). Herbert Simon proposed bounded rational theory as an alternative of former rational theory. It is more realistic and more suitable for individual decision research analysis. Hebert Siomon (1956, cited in Gigerenzer, 2001:4) proposed a theory of ‘boundary rationality’, he also compare the notion of “boundary rationality” to a pair of scissors. One blade of them is human beings’ cognitive limitations and the other is ‘structure of environment’. Both two blade are necessary for composing an entire decision making process. Ordinary consumers possess a certain amount of knowledge and limited cognitive capability. While, actually, individual’s information system and cognitive ability is not stable and varies among different person. In addition, outside elements frequently drive consumers somewhere besides the rational choice path.

2. Factors affecting rationality
Consumer decision-making process is an outcome of complex interplay between a range of factors and is bounded both by individual’s cognitive capability boundary and structure of outside environment. Because the people’s rationality is complicated and affected by dynamic elements, it is difficult to gain an overview of them all. Instead, only a few significant and selective factors will be discussed with the objective to understanding consumers’ limited rationality and its influencing factors. 2.1 cognitive capability limitations

a) Purchase objectives and expectations
The primary element affects individual’s decision making process would be consumption goals or objectives. Osselaer et al (2005) classified...
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