• Asia Marketing Journal
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• v.22 no.1
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• pp.41-60
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• 2020

The goal of the study is to understand the role of social norm in purchase decisions where demand is revealed in the form of multiple-discreteness. Consumers are socially engaged in various activities through the expectation from others in their community. Actions or decisions are likely to reflect this influence. This implicit or explicit social norm is revealed as the rules, regulations, and standards that are understood, shared, endorsed, and expected by group members. When consumers' decisions are in distance from the norm, they come to face discomfort such as shame, guilt, embarrassment, and anxiety. These pressure act as a constraint as opposed to utility in their decision making. In this study, the effect of social norms on consumer demand is captured via multiple constraint model where constraints are not only from budget equation but also from psychological burden induced by the deviation from the norm. The posterior distributions of model parameters were estimated via conjoint study allowing for heterogeneity via hierarchical Bayesian framework. Individual characteristics such as age, gender and work experience are also used as covariates for capturing the observed heterogeneity. The empirical results show the role of social norm as constraint in consumers' utility maximization. The proposed model accounting for social constraint outperforms the standard budget constraint-only model in terms of model fit. It is found that people with longer job experience tend to be more robust and resistant to the deviation from the norm. Incorporating social norm into the utility model allows for another means to disentangle the reason for no-purchase as 'not preferred' and 'not able to buy'.

• Asia Marketing Journal
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• v.18 no.3
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• pp.47-63
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• 2016

Rational choice theory holds that the alternative with largest expected utility in the choice set should always be chosen. However, it is often observed that an alternative with the largest expected utility is not always chosen while the choice task itself being avoided. Such a choice phenomenon cannot be explained by the traditional expected utility maximization principle. The current study posits shows that such a phenomenon can be attributed to the gap between the expected perceived gain (or loss) and the expected perceived value. This study mathematically analyses the relationship between the expectation of an alternative's gains or losses over the reference point and its expected value, when the perceived gains or losses follow continuous probability distributions. The proposed expected value (EV) function can explain the effects of loss aversion and uncertainty on the evaluation of an alternative based on the prospect theory value function. The proposed function reveals why the expected gain of an alternative should exceed some positive threshold in order for the alternative to be chosen. The model also explains why none of the two equally or similarly attractive options is chosen when they are presented together, but either of them is chosen when presented alone. The EV function and EG-EV curve can extract and visualize the core tenets of the prospect theory more clearly than the value function itself.

• Journal of the Korean Society for Railway
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• v.19 no.1
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• pp.87-96
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• 2016

The multinomial logit model, based on random utility maximization (RUM) theory, has been the predominant model used in travel mode choice contexts. In this paper, the travel mode choice model based on random regret minimization (RRM) theory is proposed as an alternative to the RUM model, and the applicability of the RRM model is examined. The presented model is applied to the case of inter-city travel mode choice in Korea. The empirical results show that the RUM model and RRM model have parameters that are consistent with the intuition. The goodness of fit statistics in the RRM model improved compared with the results of the RUM model. Consequently, these results show the possibility of using the RRM model in the context of travel mode choice.

• Journal of Distribution Science
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• v.11 no.5
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• pp.63-76
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• 2013

Purpose - For the past several decades, behavioral economics or behavioral decision theory has undergone rapid development. This study provides a critical review of the development of behavioral economics with a focus on what are deemed to be core theories in the field. Starting from the utility function proposed by Daniel Bernoulli in the 18th century, the development history of utility functions until the emergence of the prospect theory is thoroughly reviewed. Some of the experimental results violating the traditionally assumed utility function and supporting the prospect theory value function are summarized. The most representative principles of rational choice are transitivity, independence from irrelevant alternatives (IIA), and regularity. The development of behavioral economics has been triggered by finding counter-examples to these principles. Some of the choice behaviors discussed in this study as counter-examples to the traditional theories of rational choice are the St. Petersburg paradox; the Allais paradox; gambling behavior; and the various context effects including the similarity effect, attraction effect, and the compromise effect. The Elimination-by-Aspects (EBA) model, which was proposed as an explanation for the similarity effect, is discussed in detail as well. Based on the literature review and further analysis, this study summarizes the relationship between the context effects, prospect theory, and EBA model. Research design, data, and methodology - This study provides an extensive literature review on several important theories in the field of behavioral decision theory and adds some critical comments to the theories and the relationships among them. This study first reviews the development of utility functions. Daniel Bernoulli introduced the concept of utility function to solve the St. Petersburg paradox. In the mid-20th century, Herbert Simon proposed the "satisficing" heuristic and presented a value function with a shape different from traditional utility functions. This study highlights the strengths and weaknesses of several utility functions proposed until the emergence of the prospect theory value function. Results - This study posits that prospect theory and EBA model are the two most important theories in the field of behavioral decision theory. They can explain various choice behaviors that traditional utility maximization analysis has been unable to. The application of these models to various fields is further increasing nowadays. This study explains how prospect theory and the EBA model can be used to explain the context effects. Conclusions - The traditional economic theory relies on a single variable called "utility" in explaining consumer choice. However, this study argues that, in investigating consumer choice, several other variables should also be considered. These are the similarity among alternatives, an alternative's prototypicality within the category, the dominance relationship between alternatives, and the reference point in evaluating alternatives. Due to the development of behavioral economics, we are now closer to a more complete understanding of consumer choice behavior than in the past when we had only a single tool called utility.

• Journal of the Korean Operations Research and Management Science Society
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• v.33 no.3
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• pp.77-92
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• 2008

Commonality strategy is a popular design practice in designing a product line as it enables the firm cost saving and simplification in design, manufacturing, and distribution processes. However the issue of commonality has been mostly analyzed from a profit maximizing firm's perspective and, to our knowledge, there is no literature that deals with the issue from a different perspective. in this paper, we consider the issue of commonality strategy from a social welfare maximization perspective, and argue that commonality strategy used in designing of public goods can bring certain benefits not just for a firm but also for consumers, i.e., for society as a whole. While we assume certain cost saving in production process due to economies of scale under commonality strategy, we conceptualize two different effects of commonality strategy, utility effect due to cost saving and weighted-averaging effect, and show how these two effects interplay to determine the design of common attribute and desirability of commonality strategy. We also discuss how the implementation of commonality strategy differs under different objectives of a product line designer : social welfare and firm's profit maximization.

• Environmental and Resource Economics Review
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• v.12 no.1
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• pp.75-90
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• 2003

In this paper we have shown that a Pigouvian tax is an adequate resolution of congestion externality to attain Pareto optimality using utility maximization. For this objective, taking an open access freeway as an example, we not only derived both marginal private benefit and marginal social benefit, but also assessed the divergence between marginal private benefit and marginal social benefit. As a result, we identified that the amount of a Pigouvian tax should be the same amount as the external time cost, which is the value of the marginal time cost to Individual a incurred by Individual b through freeway congestion. This Pigouvian tax coincides with the profit or wealth maximizing toll suggested by literature on the basis of profit maximization. In addition, because an open access freeway is accounted as common property resource, we proved that average social congestion cost is essentially equal to marginal private congestion cost in our model. Finally, we showed that the optimal value of trip derived in our model is the same as that generated on profit maximization approach.

• Journal of the Institute of Electronics and Information Engineers
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• v.50 no.5
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• pp.18-24
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• 2013

Network coding has been extensively studied to increase the network throughput by exploiting the broadcast and overhearing capabilities. In this paper, we formulate a network utility maximization problem to improve the network utility in multichannel, multiradio and multisession wireless multihop network with intrasession network coding. To find the solution of this problem, we propose a congestion control, distributed rate control, and heuristic resource allocation algorithm. We find the network utility and evaluate the performance in multichannel, multiradio and multisession environment by using MATLAB. Finally, the results show that the proposed schemes can achieve throughput improvement by performing the network utility optimization in wireless multihop network.

• Proceedings of the Korean Society of Precision Engineering Conference
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• 2005.06a
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• pp.997-1000
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• 2005

Dynamic job shop environment requires not only more flexible capabilities of a CAPP system but higher utility of the generated process plans. In order to meet the requirements, this paper develops an algorithm that can select machines for the machining operations to be performed by predicting the machine loads. The developed algorithm is based on the multiple objective genetic algorithm that gives rise to a set of optimal solutions (in general, known as Pareto-optimal solutions). The objective shows a combination of the minimization of part movement and the maximization of machine utility balance. The algorithm is characterized by a new and efficient method for nondominated sorting, which can speed up the running time, as well as a method of two stages for genetic operations, which can maintain a diverse set of solutions. The performance of the algorithm is evaluated by comparing with another multiple objective genetic algorithm, called NSGA-II.

• Journal of Korean Society of Transportation
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• v.24 no.6 s.92
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• pp.103-117
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• 2006

This study develops an agent-based simulation model to evaluate tourist information systems under ubiquitous environment. In this study, individual tourist's activity chaining behavior is formulated as a utility maximization problem. The underlying assumption of the model is that tourists increase their activities within their time and budget constraints to maximize their utilities. The model seeks individual's optimal tour schedule by solving Prize-Collecting Multiple-Day Traveling Salesman Problem(PC MD TSP). The simulation-based evaluation framework allows investigating individual utility gains by their information type and the total expenditure at each tour attractions. The real-time tour activity scheduling system enables tourists to optimize their tour activities by minimizing their time loss and maximizing their opportunity to use high utility facilities.

• Journal of Satellite, Information and Communications
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• v.12 no.4
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• pp.100-105
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• 2017

In this paper, we study an interference avoidance scenario in the presence of a interferer which can rapidly observe the transmit power of backscatter communications and effectively interrupt backscatter signals. We consider a power control with a sub-channel allocation to avoid interference attacks and a power-splitting ratio for backscattering and RF energy harvesting in sensors. We formulate the problem based on a Stackelberg game theory and compute the optimal transmit power, power-splitting ratio, and sub-channel allocation parameter to maximize a utility function against the interferer. We propose the utility maximization using Lagrangian dual decomposition for the backscatter communications and the interferer to prove the existence of the Stackelberg equilibrium. Numerical results show that the proposed algorithms effectively maximize the utility, compared to that of the algorithm based on the Nash game, so as to overcome a malicious interference in backscatter communications.