Economic Demand Theory and Psychological Studies of Choice

Abstract

This chapter introduces a framework borrowed from economics within which choices between different commodities may be studied in a consistent manner. This framework is “demand theory” and the particular concept within demand theory that most directly applies to studies of choice is that of “substitutability.” The relationship between psychology and economic demand theory is explored. The chapter explores that demand theory is not so much a psychological theory as it is a definition of psychological utility. It specifies an internal mechanism or can be proven true or false. Using economic concepts of budget lines, indifference curves, and substitutability, two series of experiments are conducted involving rats' choices between two different commodities. Consumption of the commodities changed as changes are introduced into the budget set-the rats consumed more of the lower priced commodity and less of the higher priced commodity. Through computer simulation, the maximization of overall rate of reinforcement results in matching of relative rate of responding to relative rate of reinforcement.