Expected Utility Theory Of Consumer Behavior

2.3 Theories Review 2.3.1 Consumer Behaviour In promoting of merchandise and services, perception of end-user habit has been significant since, organizations contract with end users who are dissimilar in life. To assist spot what is imperative to the buyer, knowledge of customer conduct is important. This will help suggest the important influences on consumers’ decision making enabling marketers to give goods and services that meet the needs of their target market. Loudon and Bita (1994) gave this definition of consumer behaviour as “the physical activity and decision process people engage in when evaluating, acquiring, using or disposing of goods and services” Consumer buying behavior refers to the buying behaviour of last consumers—people

According to Shao (2006), earliest researchers saw decision-making as gambles and decision makers as “economic” men striving to maximize payoffs. The word ‘normative’ describes how people who make decisions should behave to gain most payoffs. Examples of this include Expected Utility Theory adapted by Neumann and Morgenstern (1947) and Subjective Expected Utility Theory adapted by Savage (Shao, 2006). One important addition to the Expected Utility Theory is the Subjective Expected Utility Theory propounded by Savage (Shao, 2006). The main difference between the two is that, the first uses objective probabilities, while the other uses subjective probabilities. By using subjective probabilities for objective probabilities, Subjective Expected Utility Theory states that the decision maker may not be sure about whether the various outcomes (payoffs) will actually occur if the option chosen (Beach, 1997). Schoemaker (1982), on the other hand states that Normative Decision Theory is actually a bulk of theories and at their core is a rational decision maker. The implied decision process is a single-stage process of persistent and consistent calculations of the options’ utilities. Schoemaker also stated that the consumer decision-making process is a complex one . Notwithstanding this, Beach (1997) states that the normative assumptions are imposing an order of complexity of decision-making. As time goes on, there has been growing dissatisfaction with the normative approach to studying and understanding consumer decision-making because the observed decision behaviour often violates the underlying assumptions of Normative Decision