The Collapse of Indifference: A Unified Framework for Behavioral Engagement

Sekimonyo, Jo M. and Casimir, Tara (2026): The Collapse of Indifference: A Unified Framework for Behavioral Engagement.

Abstract

This paper challenges the continued reliance on preference-based rational choice as the foundation of economic analysis. Traditional models assume that individuals continuously rank alternatives and act to maximize utility, yet a substantial body of empirical and experimental evidence shows behavior marked by inertia, impulsivity, and context dependence. Building on, but moving beyond, bounded rationality and prospect theory, this paper proposes Indifference Theory, grounded in a Propensity to Act (Pa) framework, as an alternative foundation for modeling action. The model reconceptualizes decision-making as threshold-based rational minimization of indifference. Individuals remain inactive when the margin of action, or indifference margin, is non-negative (Pa ≥ 0) and act only when it becomes negative (Pa < 0). Action is triggered by the collapse of indifference across three weighted dimensions: sustenance value, reflecting material need; sentimental value, capturing emotional or symbolic weight; and proximity value, representing accessibility or attainability. Indifference Theory accounts for behaviors often treated as anomalies, including status quo bias, loss aversion, and conditional engagement, by showing that they arise from threshold-based indifference and its breakdown. By replacing continuous maximization with threshold activation, the framework integrates key insights from behavioral economics while extending their explanatory scope. The implications are both theoretical and practical. For scholars, Indifference Theory offers a testable paradigm that can be operationalized through surveys, experiments, and econometric estimation. For firms, policymakers, and organizers, it suggests that effective strategies require eroding indifference across multiple dimensions simultaneously. Ultimately, Indifference Theory provides a more empirically consistent foundation for modeling choice and for designing institutions, policies, and market strategies in the twenty-first century.

• Item Type: MPRA Paper
• Language: English
• Keywords: Indifference theory Propensity to act Behavioral economics Threshold models Decision-making Inertia Rational choice
• Subjects: B - History of Economic Thought, Methodology, and Heterodox Approaches > B5 - Current Heterodox Approaches; D - Microeconomics > D2 - Production and Organizations; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy; H - Public Economics > H0 - General; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights

References

Arrow, K. J. (1951). Social choice and individual values. Yale University Press. Arrow, K. J. (1987). Rationality of self and others in an economic system. In R. M. Hogarth & M. W. Reder (Eds.), Rational choice: The contrast between economics and psychology (pp. 201–215). University of Chicago Press. Banerjee, A. V., & Duflo, E. (2019). Good economics for hard times. PublicAffairs. Becker, G. S. (1976). The economic approach to human behavior. University of Chicago Press. Camerer, C. F. (2003). Behavioral game theory: Experiments in strategic interaction. Princeton University Press. Chetty, R. (2015). Behavioral economics and public policy: A pragmatic perspective. American Economic Review, 105(5), 1–33. https://doi.org/10.1257/aer.p20151108 Debreu, G. (1959). Theory of value: An axiomatic analysis of economic equilibrium. Yale University Press. DellaVigna, S. (2009). Psychology and economics: Evidence from the field. Journal of Economic Literature, 47(2), 315–372. https://doi.org/10.1257/jel.47.2.315 Ezrachi, A., & Stucke, M. E. (2016). Virtual competition: The promise and perils of the algorithm-driven economy. Harvard University Press. Ezrachi, A., & Stucke, M. E. (2020). Competition overdo: How amazing markets can reach destructive extremes. HarperBusiness. Finkel, E. J. (2018). The all-or-nothing marriage: How the best marriages work. Penguin Books. Gigerenzer, G. (2008). Rationality for mortals: How people cope with uncertainty. Oxford University Press. Gigerenzer, G. (2015). Simply rational: Decision making in the real world. Oxford University Press. Granovetter, M. (1978). Threshold models of collective behavior. American Journal of Sociology, 83(6), 1420–1443. https://doi.org/10.1086/226707 Heckman, J. J. (1979). Sample selection bias as a specification error. Econometrica, 47(1), 153–161. https://doi.org/10.2307/1912352 Hirschman, A. O. (1970). Exit, voice, and loyalty: Responses to decline in firms, organizations, and states. Harvard University Press. Iyengar, S. S., & Lepper, M. R. (2000). When choice is demotivating: Can one desire too much of a good thing? Journal of Personality and Social Psychology, 79(6), 995–1006. https://doi.org/10.1037/0022-3514.79.6.995 Kahneman, D., & Tversky, A. (1979). Prospect theory: An analysis of decision under risk. Econometrica, 47(2), 263–291. https://doi.org/10.2307/1914185 Kuhn, T. S. (1962). The structure of scientific revolutions. University of Chicago Press. Laibson, D. (1997). Golden eggs and hyperbolic discounting. Quarterly Journal of Economics, 112(2), 443–478. https://doi.org/10.1162/003355397555253 Madrian, B. C., & Shea, D. F. (2001). The power of suggestion: Inertia in 401(k) participation and savings behavior. Quarterly Journal of Economics, 116(4), 1149–1187. https://doi.org/10.1162/003355301753265543 Matějka, F., & McKay, A. (2015). Rational inattention to discrete choices: A new foundation for the multinomial logit model. American Economic Review, 105(1), 272–298. https://doi.org/10.1257/aer.20130047 McFadden, D. (1974). Conditional logit analysis of qualitative choice behavior. In P. Zarembka (Ed.), Frontiers in econometrics (pp. 105–142). Academic Press. Milkman, K. L., Patel, M. S., Gandhi, L., Graci, H. N., Gromet, D. M., Ho, H., Akinola, M., Beshears, J., Choi, J. J., Dai, H., Fox, C. R., Hilchey, M. D., Lee, T. W., Rothman, A. J., & Duckworth, A. L. (2021). A megastudy of text-based nudges encouraging influenza vaccination. Proceedings of the National Academy of Sciences, 118(20). https://doi.org/10.1073/pnas.2101165118 Mullainathan, S., & Obermeyer, Z. (2022). Diagnosing physician error: A machine learning approach to low-value care. Quarterly Journal of Economics, 137(2), 675–726. https://doi.org/10.1093/qje/qjab039 Mullainathan, S., & Shafir, E. (2013). Scarcity: Why having too little means so much. Times Books. Olson, M. (1965). The logic of collective action: Public goods and the theory of groups. Harvard University Press. Samuelson, P. A. (1938). A note on the pure theory of consumer’s behaviour. Economica, 5(17), 61–71. https://doi.org/10.2307/2548836 Samuelson, P. A. (1947). Foundations of economic analysis. Harvard University Press. Samuelson, P. A. (1948). Consumption theory in terms of revealed preference. Economica, 15(60), 243–253. https://doi.org/10.2307/2549561 Samuelson, W., & Zeckhauser, R. (1988). Status quo bias in decision making. Journal of Risk and Uncertainty, 1(1), 7–59. https://doi.org/10.1007/BF00055564 Savage, L. J. (1954). The foundations of statistics. Wiley. Schwartz, B. (2004). The paradox of choice: Why more is less. Ecco. Sekimonyo, J. M. (2020). Ethosism: Self-enslavement abolitionist manifesto. Wipf and Stock. Sen, A. (1977). Rational fools: A critique of the behavioral foundations of economic theory. Philosophy & Public Affairs, 6(4), 317–344. Sen, A. (1999). Development as freedom. Knopf. Simon, H. A. (1957). Models of man: Social and rational. Wiley. Sims, C. A. (2003). Implications of rational inattention. Journal of Monetary Economics, 50(3), 665–690. https://doi.org/10.1016/S0304-3932(03)00029-1 Stigler, G. J., & Becker, G. S. (1977). De gustibus non est disputandum. American Economic Review, 67(2), 76–90. Sunstein, C. R. (2019). On freedom. Princeton University Press. Sunstein, C. R. (2020). Too much information: Understanding what you don’t want to know. MIT Press. Sunstein, C. R. (2021). Sludge: What stops us from getting things done and what to do about it. MIT Press. Sweezy, P. M. (1939). Demand under conditions of oligopoly. Journal of Political Economy, 47(4), 568–573. Thaler, R. H. (2015). Misbehaving: The making of behavioral economics. W. W. Norton. Thaler, R. H., & Sunstein, C. R. (2008). Nudge: Improving decisions about health, wealth, and happiness. Yale University Press. von Neumann, J., & Morgenstern, O. (1944). Theory of games and economic behavior. Princeton University Press. Zuboff, S. (2019). The age of surveillance capitalism: The fight for a human future at the new frontier of power. PublicAffairs.