A Satisficing Choice Model

Abstract

While the assumption of utility-maximizing consumers has been challenged for decades, empirical applications of alternative choice rules are still very recent. We add to this growing body of literature by proposing a model based on Simon's idea of a "satisficing" decision maker. In contrast to previous models (including recent models implementing alternative choice rules), satisficing depends on the order in which alternatives are evaluated. We therefore conduct a visual conjoint experiment to collect search and choice data. We model search and choice jointly and allow for interdependence between them. The choice rule incorporates a conjunctive rule and, contrary to most previous models, does not rely on compensatory tradeoffs at all. The results strongly support the proposed model. For instance, we find that search is indeed influenced by product evaluations. More importantly, the model results strongly support the satisficing stopping rule. Finally, we perform a holdout prediction task and find that the proposed model outperforms a standard multinomial logit model.

The Maximizing Mind-Set

“…However, we did not find any difference between a satisficing mind-set and the baseline condition. Although it is difficult to draw strong inferences from this null result, one possibility is that the default state for most of the individuals is similar to that of satisficing (Shaklee and Fischhoff 1982;Stüttgen, Boatwright, and Monroe 2012). Future research may explore a satisficing mind-set and connect it with individuals' chronic behavioral tendency to maximize or satisfice (see Turner et al 2012).…”

Random regret minimization for consumer choice modeling: Assessment of empirical evidence

“…Some notable examples include the Contextual Concavity Model (Kivetz et al, 2004) which captures reference dependency and decreases in sensitivity by means of a locally concave utility function; the Relative Advantage Model (Tversky & Simonson, 1993) which incorporates loss aversion and decreasing sensitivity by means of a non-linear advantage/disadvantage function; the Elimination-by-Aspects model (Tversky, 1972), which assumes that decision makers randomly select attributes (more important attributes have a higher chance of being selected), and eliminate alternatives which do not perform well enough on the attribute; the Lexicographic model (e.g., Saelensminde, 2006) which can be considered a special case of an Elimination by Aspects model in that it assumes that decision makers only consider one attribute when choosing, and select the best performing (on that attribute) alternative; the Satisficing model recently proposed by Stüttgen et al (2012), which postulates that decision makers randomly and the generic context dependent model (Rooderkerk et al, 2011) which simultaneously incorporates compromise, attraction and similarity effects. Each in their own way, these models deviate from the linear-in-parameters RUM model by allowing for non-IIA behavior, choice set composition effects, reference dependency and asymmetry of preferences.…”

An Interdisciplinary Review of Research in Conjoint Analysis: Recent Developments and Directions for Future Research

“…Recently, Hauser et al [76] propose two machine-learning algorithms to estimate cognitively simple generalized disjunctions-ofconjunctions (DOC) decision rules, and Liu and Arora [114] develop a method to construct efficient designs for a twostage, consider-then-choose model. 6 Stuttgen et al [164] propose a continuation of the line of research started by Gilbride and Allenby [67] and Jedidi and Kohli [89] that does not rely on compensatory trade-offs at all. These finding are consistent with economic theories of consideration set wherein consumers balance search costs with option value of utility maximization to achieve cognitive simplicity.…”

“…Several interesting behavioral processes such as the formation and dynamics of the consideration set still need to be understood. Given the technological advances (i.e., e y e -t r a c k i n g t e c h n o l o g y ) i n d e a l i n g w i t h noncompensatory processes and satisficing rules, it behooves conjoint researchers to adapt such methods in the future (see [164,173], and [157]). 3.…”