Consumer Rationality and Economic Efficiency: Is the Assumed Link Justified?

In this paper, the authors investigate a basic assumption underlying most models based on social or mathematical psychology that consumers are rational in the sense of choosing the most economically efficient brand. Using Data Envelopment Analysis (DEA) for measuring the efficiency of individual consumer choice, they report the results of two empirical studies, one involving the social psychology based theory of reasoned action and the other involving the mathematical psychology based traditional conjoint analysis, that were conducted to investigate the economic efficiency underlying the individual choice predictions of the particular model. Results indicate that, in either case, the predictions are not independent of economic efficiency. Further, either model has a significantly higher first choice hit rate for the homo economicus group than for the other group. Implications of these results for market segmentation as well as directions for future research are discussed.