Values in Consumer Choice: Do They Matter?

Abstract

Mathematical tractability has restricted economic analysis of consumer behavior within a confined boundary of certain axioms. Often, these axioms are found to be empirically false. Even more importantly, these axioms and the analytical framework based on them is incapable of explaining economic choices in environment goods, public goods and social choice. Studies in behavioral finance have also documented information processing incapacities and biases that challenge some of the rationality assumptions. In this study, we collect primary data from 250 respondents to investigate whether preferences are amenable and whether preferences take account of effects on others. The evidence supports that preferences are amenable among the respondents in the sample and that relational utility models are more realistic as compared to self-centric utility models. Using chi-square test of independence, we also establish that the values of respondents’ are independent of income and age.

Keywords: Consumer Behavior, Rationality, Utility Maximization, Values, Preferences

JEL Classification: D11, D12, D13