Shipman theory in behavioural economics : a review of theory and empirical work

Decisions involving consumers' choices made in the market are not strictly rational but on many occasions they are influenced by social, cognitive, psychological and emotional factors. These decisions have consequences for market prices, resource allocation, and returns. The aim of the study was to test a hypothesis and consequently to develop or modify a theory that challenges the principle that human rationality is not the only thing that controls market decisions but also other non logic factors such as sentimental affection behaviours do affect decisions. The method used was the interview method coupled with case study approach. Furthermore, other strategic interaction methods such as observation techniques were made in a Ghanaian Harbour. Results show that when individuals make choices and decisions in market transactions, which are connected with human beings and they also have economic consequences, they are influenced by whether they have sentimental affection with them or not. Lack of sentimental affection with persons compels consumers to demand for magnitude needs that are appraised as powerful rational incentives in the determination of economic transactions. The conclusion is that behavioural economics assumptions are supported by the findings of the study, especially, the concept that people often make decisions based on approximate rules of thumb and not strict logic. In this essay one also sees market inefficiencies concerning the mispricing and non-rational decision making that occur in the market during day to day business activities.