How Do We Choose? Towards an Alternative Theory of Consumer Behavior

In this paper we explore how economists have addressed consumer behavior. We begin by analyzing the fundamental underpinning of neoclassical consumer behavior, utility maximization. We show how the contributions of behavioral economics, which prides itself on finding moments of nonconformity within the theory of consumer behavior, has put into question the validity of mainstream consumer choice modeling Accepting that the orthodox theory provides a poor model, the question remains: What alternative theories of consumer behavior exist? We discuss two alternative frameworks for consumer behavior: the endogenous preferences literature and the post-Keynesian notion of consumer choice. While both frameworks have provided valuable insights into consumer behavior, we argue that neither theory fully captures the complexities of consumer behavior. As such, we turn to literature in Business and Psychology surrounding how consumers actually behave. We find three common principles in the literature: consumer cannot process all information, preferences are malleable, and preferences are categorized eliciting varied behaviors dependent upon the category. We posit a basic neural network model that captures the three principles and illuminates some of the complexities of consumer behavior.