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Agent based model 4: Consumer behaviour

This lecture introduces a model of consumer behaviour in NetLogo
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Here’s the NetLogo model of consumer behaviour. And I will first guide you through the layout of the model. Here, in the middle, in the black part, you see all kinds of coloured dots. Each adult resembles an assimilated consumer. At this moment, the consumers selected different products. The products can be green, blue, or red. And they can be made different using these settings over here. They can have a different price, different service level, and a different level of quality. At this moment, all products are equal, as you can see. If we shift the sliders to the right, it becomes more attractive.
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Do we put a slider to the left, for example, service blue, then the service level of the blue product becomes worse. For this moment, we use an equal setting. And if you look here, here we have the social influence. And we set the social influence first at 0.
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Like this. And now we start. And what I would like you to do is have a look here at the frequencies of the sales of the three different products. Do we have any expectation for that? Do we expect differences at this moment? Let’s look what happens. Now the model is running. And you can see that most of the simulated consumers stuck to a certain choice. They continue consuming the green, blue, or red product, and occasionally try a different product. Market shares are quite equal in this model. And that’s not a surprise, because the products are equal. Now we change the game.
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Now it’s not only the product that is important, but satisfaction is also derived from consuming the same product as their neighbour. So, we put in some social influence. And look carefully what is happening now.
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If you monitor this closely, you can see that consumption is starting to cluster. Here we have a green cluster. Here we have a red cluster. Here’s a blue cluster. So you can see that this normative effect causes consumption to lock in in regional groups. At this moment, we can see on the top right side, the green product is in a dominating position. And still it’s equal to the products. The red product is really in trouble. So let’s help the red product. We make it cheaper by putting this slider to the right. We increase the service level bit.
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Not a lot is happening yet. Apparently the norm is very strongly in favour of the green. So let’s push a little bit more. We improve the quality. And there we see something happening. Not immediately. But you see slowly change in favour of the red product. You can put it even bit stronger.
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Then we just have to wait what happens. I mean, this is emergent. It is– look, look, look, there it goes, suddenly. These unexpected surprises are typical for these kinds of emergent processes and diffusion. We certainly saw a shift of a group shifting towards the red product. And now we can see, here is a red product group, there’s a red group. Will they conquer the rest of the society? Or are the prevailing norms of the green and blue groups too strong? We just have to wait. What we see here, that the market share of red is really skyrocketing. They conquer almost the complete market.
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Well, since red is now in a very dominant position, we can make the product more normal again. Because this was a very expensive marketing campaign, of course.
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So now the product is equal to the other products. But still, because now your norm is in favour of red, all the customers, or at least a majority, uses the red product. What you can do now is even worse– make this product a bit more expensive. Give a little bit less service. And a little bit lower quality. So at this very moment, the red product is the inferior product in the market, but as you can see, because the norm is in favour of the red product, it will still dominate the market. This is exactly what an emerging phenomenon of lock-in can be. That a less-optimal product still is capable of dominating the market because of its normality.
This video shows the simulation in NetLogo of consumer behaviour and the influence of quality, price, service and social norms in a human society.
In the next step, we will explain how to interact with this model in NetLogo.
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