Emotional Balances in Experimental Consumer Choice

Mengov, George and Egbert, Henrik and Pulov, Stefan and Georgiev, Kalin (2008): Emotional Balances in Experimental Consumer Choice. Published in: Neural Networks , Vol. 21, No. 9 (1 September 2008): pp. 1213-1219.

Abstract

This paper presents an experiment, which builds a bridge over the gap between neuroscience and the analysis of economic behaviour. We apply the mathematical theory of Pavlovian conditioning, known as Recurrent Associative Gated Dipole (READ), to analyse consumer choices in a computer-based experiment. Supplier reputations, consumer satisfaction, and customer reactions are operationally defined and, together with prices, related to READ’s neural dynamics. We recorded our participants’ decisions with their timing, and then mapped those decisions on a sequence of events generated by the READ model. To achieve this, all constants in the differential equations were determined using simulated annealing with data from 129 people. READ predicted correctly 96% of all consumer choices in a calibration sample (n = 1290), and 87% in a test sample (n = 903), thus outperforming logit models. The rank correlations between self-assessed and dipole-generated consumer satisfactions were 89% in the calibration sample and 78% in the test sample, surpassing by a wide margin the best linear regression model.

• Item Type: MPRA Paper
• Language: English
• Keywords: Consumer behaviour; Decision making, Gated dipole; READ; Satisfaction; hedonic treadmill
• Subjects: C - Mathematical and Quantitative Methods > C4 - Econometric and Statistical Methods: Special Topics > C45 - Neural Networks and Related Topics; D - Microeconomics > D1 - Household Behavior and Family Economics > D12 - Consumer Economics: Empirical Analysis; D - Microeconomics > D2 - Production and Organizations > D22 - Firm Behavior: Empirical Analysis; D - Microeconomics > D4 - Market Structure, Pricing, and Design > D47 - Market Design; D - Microeconomics > D9 - Intertemporal Choice > D91 - Intertemporal Household Choice ; Life Cycle Models and Saving

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