I present to you, the "Rational Consumer"
Updated: Jul 17
In the Season 7 Halloween episode of the very famous sitcom The Office, Pam offers a booklet of $15,000 dollars worth of coupons as prize to the person who is dressed the best for Halloween. Every Dunder Mifflin employee is excited about the prize money and gives their best shot at it. Oscar, who is generally pretty timid and indifferent about office activities, appears to be thrilled by the contested prize money too. He puts a lot of thought into it, and decides on a costume which rebels against the prize; a pair of pants and a shirt with a cardigan on top, as the “Rational Consumer”.
Who is a rational consumer?
A rational consumer is considered to be that person who makes rational consumption decisions. He is anyone whose choices are complete and transitive, i.e., the person should be able to make a choice given between different goods. The person cannot be indifferent while choosing between Nirvana, Pink Floyd and Queen. If the consumer likes listening to Nirvana over Queen, and Pink Floyd over Nirvana, then he has to always choose playing Pink Floyd over Queen or else it will break the law of transitivity.
A rational consumer will also always behave in accordance with the non-satiation theory of goods. If he gets to have 10 pens for free, why would he have 5?
Drawing connotations in the same context, in the diagram below, the consumer is indifferent between buying two commodities X & Y. Hence, we derive the indifference curve (IC). An indifference curve is a choice between two commodities a consumer is indifferent between. Also, observe, as we climb through the ICs, IC2 will give the consumer higher levels of satisfaction than IC1 or IC0. So, any consumer would choose a higher IC to maximise his level of satisfaction.
By presenting himself as the “rational consumer”, Oscar wanted to point out that for in order to redeem 15,000 dollars in coupons, the consumer would have to spend more than $50,000 on all the meals to put it to use; something a rational consumer would never do. In other words, Oscar’s depiction of the “rational consumer” is nothing but an effort of portraying a rebel against the prize money. In the show, Oscar has been displayed several times as the critical thinker & observer. However, in this case, Oscar’s theory of rebelling against the prize money by dressing up as a rational consumer violates the law of non-satiation theory of goods, since as we just saw, to a rational consumer, more is always better. Having a book full of coupons is better than having nothing at all.
Towards the end of the episode, Pam hands a piece of paper to all employees of Dunder Mifflin Scranton branch to vote. The voting rule is such that you vote for the person whom you think has dressed the best except yourself. Most of the employees vote for someone who they think has a lesser shot at winning the prize money as against them. Oscar’s costume appearing un-appealing and boring, in plain set of clothes, and mostly the lack of understanding of his intent towards the theme is what makes most Dunder Mifflin employees to be under the impression it’s ‘rational’ to vote for him. According to them, voting for him would increase their chances of winning, since most of the employees would be reluctant to vote for shoddy costume. However, it in itself is an ‘irrational’ decision considering everyone sharing the same viewpoint, and therefore he is made the winner in the end; a classic example of “Bounded Rationality”.
So, What is Bounded Rationality?
Bounded rationality is the limit/ceiling up to which you can make rational decisions in consideration of various limitations that exist while making the decision.
Let’s take an example - your friend asks you to choose a movie for Saturday movie night party. You want to select a movie/series which is comforting, exciting, interesting, high on IMDb rating and just hits the correct spot (for me, it’s The Office!) and caters to all the needs of your friends. Most of the time you end up choosing nothing at all because it’s humanly impossible to make such a decision considering all the limits that exist - certain time frame, availability, and limitation of making cognitive decisions when presented with many choices.
The best possible solution to this problem is creating a narrow frame of wants/needs in place of broad frame, which is called satisficing - a good enough point which feeds your cognitive ego. You tell yourself; “I’m going to choose a movie”, which is where you and your friends collectively decide on a particular genre and check the ones available with an IMDb rating above 7.
So, even though the employees of Dunder Mifflin aimed to make a rational decision, there’s a limit to their ability to make it. Knowing the strategy of others to plan your decision was an impossible task, and cognitively time consuming. Therefore, according to bounded rationality, sometimes, being irrational is rational.