The rationality assumption is there to facilitate the study of behavior in an academic framework by "holding other things constant", otherwise, a "relative" theoretical understanding would not have been possible to see what happens when "ceteris peribus" assumption is violated. Economists already talked about it with models. Marketing discipline also stepped into it, which is oftentimes called "applied micro-economics". Any assumption can be valid or invalid based on the behavioral context. The following references may be helpful in this regard:

• Becker, G. S. (1962). Irrational behavior and economic theory. The Journal of Political Economy, 1-13.
• Deaton, A., & Muellbauer, J. (1980). Economics and consumer behavior. Cambridge university press.
• Vigneron, F., & Johnson, L. W. (1999). A review and a conceptual framework of prestige-seeking consumer behavior. Academy of Marketing Science Review, 1(1), 1-15.
• Thaler, R. (1980). Toward a positive theory of consumer choice. Journal of Economic Behavior & Organization, 1(1), 39-60.
• Holbrook, M. B., & Hirschman, E. C. (1982). The experiential aspects of consumption: Consumer fantasies, feelings, and fun. Journal of consumer research, 132-140.
• Griskevicius, V., & Kenrick, D. T. (2013). Fundamental motives: How evolutionary needs influence consumer behavior. Journal of Consumer Psychology, 23(3), 372-386.
• Shah, A., Aaker, J., Andreasen, A., Ariely, D., Bloom, P., Britton, J. E., ... & Keller, P. (2011). Nudging our Way to a Better Tomorrow: Bridging the Gap between Consumer Behavior Research and Public Policy. BUILDING CONNECTIONS, 39, 679.

Thanks, Khandoker.  I appreciate your input very much.  Could you give an example of what you would describe as "rational consumer behavior'?  Could you also give an example of what you would describe as 'irrational consumer behavior'?  Also, what would you tell a student who can't accept this assumption as valid?  Thanks!

For an academic discussion, there is a need to have a starting point, from where we may move towards branches and complications. Thus, discussants need to agree that the starting point has "some" validity in the first place. Academic "rebellion" is appreciated and should be welcome, at the same time, the predecessors' contribution in the field should be appreciated. So I think the Rational Choice Theory could be a starting point.

If we talk from the perspective of Rational Choice Theory in a micro context, which basically says (in an oversimplified layman version) that individuals decide based on their own calculations of "costs" vs. "benefits", then the rational choice would be defined as the one where benefits outweigh the costs. The important thing to note here is the individual's judgment/calculation of costs vs.benefits, and not someone who is an observer of the behavior. For example, a mother selling her baby to buy an i-phone (it was in the news) feels that her choice is rational because her own calculated benefits outweigh the costs. From a normative perspective (at macro level), the State as a decision-maker would find it irrational because the social cost outweighs the social benefits of having an i-phone in exchange of a baby!

On a side note, it should be mentioned that even rational choice theorists do not assume that the assumptions are reflective of reality, but if you mean that the student is saying "all consumers act irrationally", then the question is who is doing the calculation of costs vs. benefits? From an observer's point of view, all consumers act irrationally IF the observer always judges (calculates) others' decisions by his/her own criteria (no positive or normative criteria is meant) and concludes that the costs outweigh the benefits. From consumers' point of view, the criteria for calculating costs and benefits could entirely be different from an observer, thus it is completely "rational" to the decision maker. The only point left for discussion (in my humble opinion) whether the observer is authoritative enough (like a State) to impose some normative criteria on individual (and group) decisions to declare or view it as "rational" or "irrational" based on some sort of aggregate (e.g., social and political) costs and benefits.

Thanks, Khandoker.  Your explanation of costs & benefits makes a lot of sense.  And who is measuring the costs & benefits makes a difference, too.  I appreciate your input into this discussion!  Thanks, again. 

Irrational consumer behavior is especially related to the impact of emotions and use of inferences (heuristics processing) on the consumer in the decision process or consumption experience. Here some theoretical references in psychology:

- Chaiken, S., & Trope, Y. (Eds.). (1999). Dual-process theories in social psychology. Guilford Press.

- Bargh, J. A., & Chartrand, T. L. (1999). The unbearable automaticity of being. American psychologist, 54(7), 462.

- Kahneman, D. (2003). A perspective on judgment and choice: mapping bounded rationality. American psychologist, 58(9), 697.

- Strack, F., & Deutsch, R. (2004). Reflective and impulsive determinants of social behavior. Personality and social psychology review, 8(3), 220-247.

- Schwarz, N. (2011). Feelings-as-information theory. Handbook of theories of social psychology, 1, 289-308.

See

Rationality for Economists

Daniel McFadden

Journal of Risk and Uncertainty

The perfect Rationality assumption is too strong, false, and unnecessary at the same time. The perfect rationality assumption can (and should) be relaxed, just like the last century of economic theory relaxed most other assumption.( absense of externalities, perfect information, price taking behavior etc).

Some consumers do.

Generally, consumers take decisions on the basis of their emotions; they do use rational thinking to explain their decision.

Not at all times, Some have limited capacity to calculate all costs and benefits of a decision. Are influenced by their social networks. Often act reciprocally rather than in their own pure self interest. Lack self control and seek immediate satisfaction.