Free Market

[Utah]

"We should no longer assume rational behavior when constructing the descriptive models of economic behavior"

Huh? That is simply not true. For example, lets take pricing. Today we assume that if the price of a particular good rises then people will buy less and/or find alternatives. Are you saying that is not true?

To what studies are you referringto?

[Cyrus]

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To what studies are you referring to?

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Inter alia:

"Judgment under Uncertainty : Heuristics and Biases"

"The Winner's Curse"

"The Perception of Risk"

[Utah]

Ah, I see what you are saying. I guess I take exception to the vigor of your argument, not the general point you were making. The markets are not 100% efficient, but it doesnt mean there is no rationality.

Heuristics is a fascinating area in the retail world. I was doing some work with heuristics in brand identity when I worked in strategic planning for Marshall Fields. We were trying to answer, "why do people buy from Marshall Fields?". The answer wasnt product or price. However, that doesnt mean that product or price isnt the most important topic. It simply means it wasnt enough of a differentiator. Rationality still existed - to a point.

Heuristics is why automakers never really point out the features of a car in their ads. instead, they simply try to paint an image of who drives the car.

I remember when I searched for my first house. I had a list of absolute requirements (e.g., 2 bathrooms) and searched for a long time based on the criteria. Then, one day I drove by a house, said, "thats the one" and made an offer on the house without ever walking in it (although contigent on an inspection). I have always been fascinated by that decision.

I plan on ordering the first book you mentioned.

[Cyrus]

I've posted about this once before.