How “Psychological” Should Economic and Marketing Models Be?

Abstract

The authors discuss the potential of making the recently developed behavioral economics models even more “psychological” by (1) increasing their context specificity, (2) allowing different people to have different model parameters, and (3) capturing the underlying psychological processes more explicitly. They show that some of these models already make room for understanding context specificity and heterogeneity, and they discuss new ways to enrich the models along those two dimensions. The task of adding process details is more challenging in simple mathematical forms because these models must serve as building blocks for aggregate market models.