Perfectly rational consumers are expected to maximize the total utility of their purchases while keeping spending within their budget (maximizing). However, consumers often satisfice when shopping, selecting the first “satisfactory” item that is not too expensive, rather than gathering substantial information to make sure that they are getting the most bang for their buck (satisficing). This portion of the CCS project is designed to see how aggregate demand, or purchases of all consumables, shifts depending on whether and how much consumers satisfice or maximize their utility from consumption. To simulate the aggregate supply curve we randomly generate multiple different items in three categories: cheap, disposable goods (type x), cheap, multi-use goods (type y), and expensive multi-use goods (type z). Exemplars of each type are plastic silverware, stainless steel silverware, and sterling silver silverware. We do not model the savings/consumption decision but rather each consumer agent is given a budget or “discretionary income,” which is randomly drawn from a Wiebull distribution with an exogenously determined mean. This basically means that many agents will have relatively small budgets while some will have moderate amounts to spend and a few “wealthy” agents will be randomly given so much “money” that they can afford to buy as much of just about anything that they want. Agents also have variable preferences for different product attributes, including convenience or “disposability” and are expected to either maximize or satisfice depending on the model run. Satisficers in particular will purchase the first bundle of goods that they find with utility above their satisfaction threshold. Because the value of this threshold matters, we vary it across runs, examining the effects of different levels of satisficing within an economy (see Roozmand and Webster (2014) for detailed description of maximizing and satisficing decision processes).

CCS.2 Aggregate Demand with Different Levels of Satisficing and Maximizing Behavior

Results from the model conform to economic expectations. Demand curves generated from agent purchasing decisions are convex and downward sloping. We also tested to be sure that changes in income generated expected shifts in the demand curves. Results comparing different levels of satisficing with maximizing behavior can be seen above in Figure CCS.2. In this case, when satisficing (Sat) is equal to 1, then agents act as perfect utility maximizers but with lower satisfaction thresholds (Sat < 1) the tendency to satisfice is higher. The first thing to note is that for relatively cheap items (types x and y), higher levels of satisficing are correlated with higher levels of consumption but for the more expensive multi-use items (type z), consumption decreases at each price level with greater amounts of satisficing. We also see that consumers tend to switch to more disposable items when levels of satisficing are higher, as shown clearly in quadrant D of the figure. This is because satisficers are more willing to pay for the convenience of a single use item rather than maximizing utility through purchase of mult-use items. Most important, the model confirms that higher levels of satisficing lead to higher total consumption and waste in an economy. This result is not terribly surprising given the simple specification of consumer behavior in the model but this is only the first step to better understanding of consumer choice and sustainability.

References:

Roozmand, Omid and D.G. Webster. 2014. Agent based modeling of consumer choice and aggregate demand: Maximizers vs Satisficers. International Journal of Agent Technologies and Systems, 6 (4): 18p.