I am currently writing a book on a procedural consumer. This book expands on the following papers and is directly related to Informational Society:
I Published papers
A. Two-Stage Budgeting: A difficult problem. This paper has now been published in the Computational Economics. See below for details and if you wish click here for pdf version.
This paper has two main points:
1. People make their purchases item-by-item and not by bundles.Consider grocery store with 30 categories and 10
items/categories
Example: Types of cereal boxes, types of fruit, milk products, and
so on
Suppose for the sake of argument that your shopping list had 30
items -- one from each category.
a. Conventional grocery store (Item-by-item): You take a
shopping
cart and proceed
through the isles stopping at each category and select one item from
each category.
b. Now consider an alternative arrangement(Bundle): The grocery story
arranges
a column of shopping carts each with a different combination of the
items in the 30 categories. The consumer proceeds down the column and
selects the shopping cart with the bundle he desires.
What is the difference
a. Item-by-item: The number of comparisons the consumer must
make is
10+ 10 + ... + 10 = 30 x 10 = 300
b. Bundle: The number of comparisons the consumer must make is 10 x 10
x ... x 10 = 1030. (An unbelievable large number)
2. Budgeting is an incremental adjustment process
Allocating money into categories is a quadratic process. For
example, If you wish to allocate $100 into three categories a person
must conpare the utility of (100,0,0), (99, 0,1), (99,1,0) and so
on. Faced with a large number of alternatives, humans use
sublinear procedures.
Many successful student budgetors do not use spreadsheets or
other writen records. What they do is monitor the flow of funds
in their accounts and make incrementat adjustments. The two most
variable categories and food and entertainment. Some student have
a feast of famine budgeting style where they feast for the the first
couple of weeks after receiving funds and then sharply cut back
(famine) the last two weeks. An important aspect of budgeting is
learning to live within one's means.
B. An Ordering Experiment. This paper has now been published in the Journal of Economic Behavior and Organization. See below for details and if you wish click here for pdf version.
To explain ordering I have prepared a short video: Sort
The bucket sort is a linear process in that the number of operations is a linear function of the number of objects to be ordered.
The most efficient binary comparison sorts require n log2
n operations to order n objects.
Suppose you wanted to sort 100 items and both a utility
calculation and a binary comparison took 1 second. The time to do
a bucket sort is 100 seconds and the time to do the most efficient
binary comparison sort is 664 seconds.
C. On the Complexity of Consumer Decision Rules
This paper has now been published in Computational
Economics. For pdf version, click here
Human take seconds to execute decision rules not
nanoseconds. This means that using a rule such as a binary
comparison to find a preferred item faced with a large number of
alternative is prohibitively time consuming. Consider a binary
comparison operator that takes two seconds to operate and a consumer
faced with 10,000 alternatives. The time to find the optimal is
20,000 seconds, which equals 5.56 hours. It is much more
efficient for humans to initiate searches with set operators that
require only one observation per set. Markets are organized to
facilitate set operators. For example, department stores in
physical space organize goods by categories and car lots organize cars
by model.
Humans are also resonable efficient at shifting between set and individual
operators.
4. Can consumer software selection code for
digital cameras improve consumer performance? This
paper
has now published in Computational
Economics. For pdf version, click here
Information: Economics has a concept called perfect information
that is incompatable with human information processing
capabilities. The limit of data that could be given to a human
for processing to make a decision is the Heisenberg uncertainty
principle. Clearly the amount of data would total overwhelm human
processing capabilities. Consumers process a miniscule fraction
of the data with which they could be provided. Indeed, consumers
generally process a small fraction of the data available to them in the
marketplace. A better concept that perfect information is the
information value of data that depends on
a. The processing cost including the cost of
acquiring knowledge ot interpret the data
b. the ability of the data to discriminate among
alternatives
c. The reliability of the data
Creation of search code software is in its infancy. The
current generation is dominated by the idea that decisions should be
weighted averages of alternatives. This is correct for the end of
the decision process, but not the beginning. In the beginning the
consumer needs to be educated about the product and can deal with sets
and specific attributes needed for the indended use. Our paper
focuses on the initial part of a search
The codes for this paper can be viewed here
II Work in progress
4. Cyberspace Representations and Choice. This paper was presented at Digital Communities 20003 in Stockholm, Sweden in June 2003. For the revised pdf version, click here I have given up on trying to publish this paper as it is far from standard economics. Parts of it will appear in the book.