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Consumer is rational

As adapted by Bronwyn Fryer. This can include making decisions based primarily on emotion, such as investing in a company for which the investor has positive feelings, even if financial models suggest the investment is not wise.

Since a consumer has a finite amount of time, he must make a choice between leisure which earns no income for consumption and labor which does earn income for consumption.

Distance makes the central message stronger. The key is to increase shopping momentum by creating compelling front-of-store displays that offer "no-brainer" items for purchase. Increasing momentum is critical: One firm that understands this is the upscale department store Nordstrom, which works hard to provide cues to shoppers whose goal is luxury.

Assumptions[ edit ] The behavioral assumption of the consumer theory proposed herein is that all consumers seek to maximize utility. It allows for issues of psychology and emotion to enter the equation, understanding that these factors alter the actions of investors, and can lead to decisions that may not appear to be entirely rational or logical in nature.

It avoids unnecessary complications in the mathematical models. A revised understanding of consumer mental processes indicates how marketers need to rethink purchase decisions; to create effective in-store and online strategies, marketers must make the connection between mindset and behavior.

For example, an individual may choose to invest in the stock of an organic produce operation rather than a conventional produce operation if he or she has strong beliefs in the value of organic produce, even if the present value of the organic operation compared to that of the conventional operation indicates the conventional operation should earn a higher return.

Technology products and services In the pre-digital age, technology was perceived objectively and rationally. Our work reveals that consumers go through three steps in the purchase decision process. Leisure is considered one good often put on the horizontal axis and consumption is considered the other good.

Indifference curves exhibit diminishing marginal rates of substitution This assumption assures that indifference curves are smooth and convex to the origin.

Our psychological studies reveal that the purchase decisions about package goods products are largely driven by consumer perceptions that the brand is an extension of the self. Finally, it is the perceived emotional end-benefits of owning and using specific products or services that moves consumers to a purchase decision and action.

Luxury brands Consumers describe their decision-making process when purchasing a luxury product or service in terms of their judgments about the importance of the brand name and how unique and exclusive it is. This is the consistency assumption.

It is this connection that makes consumers loyal to brands.the rational consumer; i.e., that individuals know what they want and seek to make the most of the available opportunities given the scarcity constraints they face.

Notice that there are two key components here: 1 The notion that individuals havepreferences: This de nes what they. Rational behavior refers to a decision-making process that is based on making choices that result in the optimal level of benefit or utility for an individual. The assumption of rational behavior. The consumer purchase process involves rational evaluation of a product's features and attributes. But it is perceived emotional end-benefits that make us decide to buy. Psychology Today.

The theory of consumer behavior is often used to represent the process of rational choice. Frequently a person or organization has a certain amount of money to spend and must decide how much to allocate to a number of different uses. In the mainstream economics tradition, this activity of maximizing utility has been deemed as the "rational" behavior of decision makers. Consumer choice theory is based on the assumption that the consumer fully understands his or her own preferences.

In economics a rational consumer is defined as the people who act in a rational way and make rational choices, namely spending their money wisely.

Utility is a term used to measure the amount of pleasure a consumer gains from a good or service they choose to invest in, thus spending our money wisely.
