Consumer Choice and Aggregate Demand: An ABM Approach to Understanding the Impacts of Satisficing Behavior

Abstract

Satisficing behavior is one of the most important subjects in consumer behavior studies. Satisficing consumers select any affordable bundle of items with utility larger than their satisfaction threshold. This contrasts to maximizing behavior, where the consumer selects the bundle of items with the highest possible utility within his or her budget constraint. The authors hypothesize that, all else equal, satisficers will purchase more goods overall when compared with maximizers. Furthermore, satisficers will also purchase more disposable rather than durable goods because they are less concerned with maximizing the total value of their purchases. To test these hypotheses, an agent-based model of consumer behavior has been developed that allows for decision making based on either satisficing or maximizing rules. Satisficer agents use a modified genetic algorithm to find a satisficing bundle. Maximizer agents apply dynamic programming to find the best bundle of items. The aggregated results of consumer agents’ purchases support aforementioned hypotheses when consumers select from three types of products: 1) cheap disposable, 2) cheap durable, and 3) expensive durable. The hypotheses also hold when a more realistic set of items is constructed based on the common economic assumption that supply curves are upward sloping. In this latter case, consumers choose bundles from a total of 5 types of items, each of which differs in price, quality, and durability. Consumer Choice and Aggregate Demand: An ABM Approach to Understanding the Impacts of Satisficing Behavior