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Expectation-based consumer purchase decisions: behavioral modeling and observations
Justin Jia1, Jia Li2, Weixin Liu3
1Haslam College of Business, University of Tennessee, Knoxville, TN 37996 USA.
Marketing Letters
|November 28, 2022
Summary
Consumers
Area of Science:
- Behavioral Economics
- Consumer Decision-Making
- Intertemporal Choice Theory
Background:
- Consumer purchase decisions are significantly influenced by expectations, particularly regarding future market conditions.
- Understanding these expectations is crucial for modeling consumer behavior.
Purpose of the Study:
- To develop and analyze a multiple-selves intertemporal choice model for expectation-based purchase decisions.
- To incorporate behavioral factors like present-biased preferences into the model.
- To explain heterogeneous consumer behavior in purchase decisions.
Main Methods:
- Developed a multiple-selves intertemporal choice model.
- Incorporated behavioral factors such as present-biased preferences.
- Applied the model to medical service consumption data during the COVID-19 pandemic.
Main Results:
- Consumers employ a threshold perception-perfect strategy for purchase decisions.
- Decision thresholds are determined by model parameters reflecting market condition expectations.
- The model explains heterogeneous purchase decisions based on income and health insurance status.
Conclusions:
- Expectations about future market conditions significantly shape consumer purchase decisions.
- The developed model effectively explains observed heterogeneous consumer behavior, particularly in healthcare consumption.
- Individual differences in expectations and preferences lead to varied purchasing patterns.
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