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First and the most important unstable fact which raises a lot of discussion on CCB is rationality
of consumer behaviour. The basic postulate of the classical theory is that the consumer maximizes
utility, or in other words behaves rationally. Since his/her income is limited, he/she maximizes
utility subject to a budget constraint, through an optimization problem.
Second (lack of information, evaluation of alternatives, cognitive ability), it is assumed that
consumers enter the marketplace with well-defi ned preferences and are capable of ranking
commodity combinations consistently in order of preference. This ranking is described
mathematically by the consumer's ordinal utility function. Preference orderings are assumed to
share four simple properties:
Completeness: A preference ordering is complete if the consumer is able to rank all possible
combinations of goods and services.
Transitivity: For any three bundles, A, B and C, if an individual prefers A to B and B to C,
then he always prefers A to C.
More is better: This property means simply that, given other things being equal, more goods
is preferred to less.
And last but not least it assumes a diminishing marginal rate of substitution. Along any
indifference curve, if a consumer moves in one direction he/she acquires more Q 1 and less
Q 2 and the rate at which he/she is willing to sacrifi ce Q 2 to acquire more Q 1 declines.
A preference ordering with a diminishing marginal rate of substitution will thus generate
indifference curves that are convex.
Third , the amount of labour performed by the consumer affects his/her level of utility. This
amount of labour can be determined on the basis of the rational-decision criterion of utility
maximization. The equilibrium conditions are similar to those which hold for the selection of
an optimal commodity combination.
Fourth , the consumer's reaction to different changes in price and level of income can be
analyzed in terms of substitution and income effects (Henderson and Quandt 1980 and others).
CCB has been challenged already by evidence from anthropology, evolutionary biology,
neurology and cognitive psychology. A survey of these challenges was undertaken by McFadden
(2005) with particular attention to opportunities afforded by new measurement methods coming
into economics.
Figure 22.2 shows diagrammatically the representation of the usefulness of prospect theory.
Here we emphasize eight main issues which show improvements that Kahneman's and Tversky's
theory can bring into tourism modelling and research.
More concretely, it is stated that the agent in economic theory is rational and selfi sh .
Nevertheless, selfi shness as rationality is also challenged. Briefl y, Kahneman (2003b) describes
how developments in economics correct and elaborate on this assumption. The tourism context
is distinguished by the sociality of human beings. Woodside argues that besides economic factors,
tourist decision-making is infl uenced by psychological and social factors. Correia and Pimpão
(2008) state that social status is one of the major drivers of travel. As empirical evidence, Silva and
Correia (2008) emphasize the need for a travel companion. Also, participation and approval from
friends and relatives can be a constraint or a facilitator to travelling.
Modern decision theory traces unchanged tastes , which originated in the famous St Petersburg
essay in which Bernoulli (1954) formulated the original version of expected-utility theory.
Unchanged taste can be also viewed as an aspect of rationality (Kahneman 2003b). Nevertheless,
the static nature of the traditional demand theory cannot account for the evolutionary features
of the tourism product, especially the emergence of new destinations or withering of others
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