This chapter was co-authored with Waiyan Leong and Andrew Collins.
Any economic decision or judgment has an associated, often subconscious, psychological process prodding it along, in ways that makes the “neoclassical ambition of avoiding [this] necessity ….unrealizable” (Simon 1978, 507). The translation of this fundamental statement on human behavior has become associated with the identification of the heuristics that individuals use to simplify preference construction and hence make choices, or to make the representation of what matters relevant, regardless of the degree of complexity as perceived by the decision maker and/or the analyst. Despite this recognition in behavioral research as long ago as the 1950s (see Svenson 1998), that cognitive processes have a key role in preference revelation, and the reminders throughout the literature (see McFadden 2001b; Yoon and Simonson 2008) about rule-driven behavior, we still see relatively little of the decision processing literature incorporated into discrete choice modeling which is, increasingly, becoming the mainstream empirical context for preference measurement and willingness to pay (WTP) derivatives.
There is an extensive literature focussing on these matters that might broadly be described as heuristics and biases, and which is crystallized in the notion of process, in contrast to outcome.