Marginal utility and restraints on gain maximization: The discrimination model of rational, repetitive choice

Abstract

The Siegel‐Ofshe two‐component repetitive choice model, while demonstrating great predictive accuracy, is difficult to interpret and is very data‐inefficient. Reasons for these shortcomings are analyzed in detail, and a modified model is suggested. The new model can be more easily interpreted, provides greater data‐efficiency, and furthermore, holds up well when tested with available data. The importance of the new “discrimination” model for sociology lies mainly with two factors: first, it can explain deviations from gain maximization, and second, it demonstrates that individuals do not act directly on the basis of values (utility) but rather on the basis of marginal utility. A comparison of the discrimination model with the Camilleri‐Berger model (a model in which marginal utility plays no role) favors the former.

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