Sequential Choice Problem and the Rationality Pattern Function

Abstract

In electronic commerce (e-commerce)markets, a decision-maker faces a sequential choice problem. That is, the objects come sequentially before the agent in this choice problem and a third party intervention plays an important role in making purchase decisions. For instance, while purchasing products/services online, a buyer's choice or behavior are often affected by the overall reviewers' ratings, feedbacks etc. Moreover, the reviewer is also a decision-maker. After a purchase, the decision-maker would put forth his/her reviews for the product, online. Such reviews would affect the purchase decision of another potential buyer, who would read the reviews before conforming his/her final purchase. The question that arises is how trustworthy are these review reports? The trustworthiness of these review reports and ratings is based on whether the reviewer is a rational or an irrational person.Indexing of the reviewer's rationality could be a way to quantify a reviewer's rationality but it does not communicate the past history of his/her behavior. In this paper, the researcher aims at formally deriving a rationality pattern function and thereby, the degree of rationality of the decision-maker or the reviewer in the sequential choice problem in the e-commerce markets. The application of such a rationality pattern function could make it easier to quantify the rational behavior of an agent who participates in the digital markets. This, in turn, is expected to minimize the information asymmetry within the decision-making process.