Philosophy

Precommitment

Microeconomics

Sunk costs

Rational choice theory (criminology)

Economics

Computer science

Psychology

Normative

Epistemology

Criminology

Prospect theory

Positive economics

Consumer choice

Regret

Machine learning

Journal of Economic Behavior & Organization

The economic theory of the consumer is a combination of positive and normative theories. Since it is based on a rational maximizing model it describes how consumers should choose, but it is alleged to also describe how they do choose. This paper argues that in certain well-defined situations many consumers act in a manner that is inconsistent with economic theory. In these situations economic theory will make systematic errors in predicting behavior. Kanneman and Tversey's prospect theory is proposed as the basis for an alternative descriptive theory. Topics discussed are: undeweighting of opportunity costs, failure to ignore sunk costs, scarch behavior choosing not to choose and regret, and precommitment and self-control.

Toward a positive theory of consumer choice