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Consumer Preference Axioms: Behavioral Postulates for Describing and Predicting Stochastic Choice

Author

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  • John R. Hauser

    (Northwestern University)

Abstract

This paper draws on econometrics, von Neumann-Morgenstern utility theory, stochastic choice theory, and consumer behavior to develop five basic axioms or postulates of stochastic choice behavior. These axioms imply the existence and uniqueness of a preference function which identifies how consumers evaluate products in terms of product attributes. The preference function produces a scalar goodness measure for each product in a consumer's choice set. These goodness measures then predict choice probabilities for each product in a consumer's choice set. The advantage of these axioms is that they extend the strengths of von Neumann-Morgenstern theory to stochastic choice and make possible the determination of consistent choice probabilities.

Suggested Citation

  • John R. Hauser, 1978. "Consumer Preference Axioms: Behavioral Postulates for Describing and Predicting Stochastic Choice," Management Science, INFORMS, vol. 24(13), pages 1331-1341, September.
    • Handle: RePEc:inm:ormnsc:v:24:y:1978:i:13:p:1331-1341
    DOI: 10.1287/mnsc.24.13.1331
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    Citations

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    Cited by:

    1. Jordan J. Louviere, 2013. "Modeling single individuals: the journey from psych lab to the app store," Chapters, in: Stephane Hess & Andrew Daly (ed.), Choice Modelling, chapter 1, pages 1-47, Edward Elgar Publishing.
    2. John R. Hauser & Steven Shugan, 1978. "Intensity Measures of Consumer Preferences," Discussion Papers 291, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    3. Liu, Jiapeng & Liao, Xiuwu & Huang, Wei & Liao, Xianzhao, 2019. "Market segmentation: A multiple criteria approach combining preference analysis and segmentation decision," Omega, Elsevier, vol. 83(C), pages 1-13.
    4. Manrai, Ajay K., 1995. "Mathematical models of brand choice behavior," European Journal of Operational Research, Elsevier, vol. 82(1), pages 1-17, April.
    5. Xia Zhao & Ling Xue & Peijian Song & Elena Karahanna, 2024. "Direct Communication and Two-Sided Matching Quality on a Digital Platform: A Perspective of Choice Based on Consideration Set," Information Systems Research, INFORMS, vol. 35(2), pages 629-641, June.
    6. Kim Kaivanto & Eike Kroll, 2014. "Alternation bias and reduction in St. Petersburg gambles," Working Papers 65600286, Lancaster University Management School, Economics Department.

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