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Author: Frank Huettner
Publisher:
ISBN:
Category :
Languages : en
Pages : 52
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Book Description
Consumers often do not have complete information about the choices they face and therefore have to spend time and effort in acquiring information. Since information acquisition is costly, consumers trade-off the value of better information against its cost, and make their final product choices based on imperfect information. We model this decision using the rational inattention approach and describe the rationally inattentive consumer's choice behavior when she faces alternatives with different information costs. To this end, we introduce an information cost function that distinguishes between direct and implied information. We then analytically characterize the optimal choice probabilities. We find that non-uniform information costs can have a strong impact on product choice, which gets particularly conspicuous when the product alternatives are otherwise very similar. There are significant implications on how a seller should provide information about its products and how changes to the product set impacts consumer choice. For example, non-uniform information costs can lead to situations where it is disadvantageous for the seller to provide easier access to information for a particular product, and to situations where the addition of an inferior (never chosen) product increases the market share of another existing product (i.e., failure of regularity). We also provide an algorithm to compute the optimal choice probabilities and discuss how our framework can be empirically estimated from suitable choice data.
Author: Frank Huettner
Publisher:
ISBN:
Category :
Languages : en
Pages : 52
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Book Description
Consumers often do not have complete information about the choices they face and therefore have to spend time and effort in acquiring information. Since information acquisition is costly, consumers trade-off the value of better information against its cost, and make their final product choices based on imperfect information. We model this decision using the rational inattention approach and describe the rationally inattentive consumer's choice behavior when she faces alternatives with different information costs. To this end, we introduce an information cost function that distinguishes between direct and implied information. We then analytically characterize the optimal choice probabilities. We find that non-uniform information costs can have a strong impact on product choice, which gets particularly conspicuous when the product alternatives are otherwise very similar. There are significant implications on how a seller should provide information about its products and how changes to the product set impacts consumer choice. For example, non-uniform information costs can lead to situations where it is disadvantageous for the seller to provide easier access to information for a particular product, and to situations where the addition of an inferior (never chosen) product increases the market share of another existing product (i.e., failure of regularity). We also provide an algorithm to compute the optimal choice probabilities and discuss how our framework can be empirically estimated from suitable choice data.
Author: Frank Hüttner
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
Consumers often do not have complete information about the choices they face and therefore have to spend time and effort in acquiring information. Since information acquisition is costly, consumers have to trade-off the value of better information against its cost, and make their final choices based on imperfect information. We model this decision using the rational inattention approach and describe the rationally inattentive consumer's choice behavior when she faces options with different information costs. To this end, we introduce an information cost function that distinguishes between direct and inferential information. We then analytically characterize the optimal behavior and derive the choice probabilities in closed-form. We find that non-uniform information costs can have a strong impact on product choice, which gets particularly conspicuous when the product alternatives are otherwise very similar. It can also lead to situations where it is disadvantageous for the seller to provide easier access to information for a particular product. Furthermore, it provides a new explanation for strong failure of regularity of consumer behaviour, which occurs if the addition of an inferior - never chosen - product to the choice set increases the market share of another existing product.
Author: Frank Huettner
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
Author: Victor P. Goldberg
Publisher:
ISBN:
Category : Consumer education
Languages : en
Pages : 58
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Author: France Leclerc
Publisher:
ISBN:
Category :
Languages : en
Pages : 190
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Author: Jeffrey Parker
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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To date, research on no-choice options has primarily examined the conditions that foster choice deferral, thus focusing on the frequency with which consumers select the no-choice option. in this article, the authors argue that even if the no-choice option is not selected, its mere presence in the choice set may alter consumers' choices. more specifically, they investigate how decision processes and preferences change when consumers have a no-choice option versus when they are forced to choose from a given choice set. they propose that the inclusion of a no- choice option in a choice set affects preferences by leading consumers to determine not only which alternative is best, but which, if any, are acceptable (i.e., meet the consumer's minimum needs). accordingly, the authors demonstrate that the inclusion of a no-choice option in the choice set (1) leads to more alternative- (rather than attribute-) based information processing, (2) increases the importance of attributes that are more meaningful when alternatives are evaluated one by one (i.e., enriched attributes), and (3) increases the importance of attributes with levels that are closer to the consumer's minimum needs (thresholds). they demonstrate that such changes influence consumers' preference structures and ultimate choices. they conclude with a discussion of the theoretical, methodological, and managerial implications of these findings.
Author: Michel Laroche
Publisher:
ISBN:
Category : Brand choice
Languages : en
Pages : 58
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Author: Maura Coughlin
Publisher:
ISBN:
Category :
Languages : en
Pages : 179
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This dissertation consists of three essays that evaluate how consumers make decisions in settings where the researcher may not know the set of alternatives from which observed choices were selected. Many empirical analyses in economics presume the researcher knows the full set of alternatives an individual compared when selecting their most preferred. In practice, this assumption may fail to hold for a variety of reasons. In the first chapter, I introduce the economic setting of unobserved choice sets and consideration sets defining to this work. In the second chapter, my coauthors and I propose a robust method of discrete choice analysis when agents' choice sets are unobserved. Our core model assumes nothing about agents' choice sets apart from their minimum size. Importantly, it leaves unrestricted the dependence, conditional on observables, between agents' choice sets and their preferences. We first establish that the model is partially identified and characterize its sharp identification region. We then apply our theoretical findings to learn about households' risk preferences and choice sets from data on their deductible choices in auto collision insurance. The third chapter evaluates the prescription drug insurance choices of Medicare beneficiaries. I propose an empirical model of demand for prescription drug plans where non-monetary plan attributes stochastically determine the composition of the set of plans that an individual considers, and monetary plan attributes determine the individual's expected utility over contracts in her consideration set. This model reconciles the classic view of insurance contracts as lotteries with purely monetary outcomes with the empirical finding that choice among insurance plans is driven by their non-monetary attributes and financial attributes beyond their impacts on costs. I estimate the model using data from Medicare Part D allowing for unobserved heterogeneity in risk aversion and in consideration sets. I find that the latter plays a crucial role in plan choices, and in contrast to previous literature that assumes full consideration of all plans, I uncover an important role for risk aversion in determining individual choices.
Author: Brian T. Ratchford
Publisher: Now Publishers Inc
ISBN: 1601982003
Category : Consumers
Languages : en
Pages : 89
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Book Description
Consumer Search Behavior and its Effect on Markets focuses on the consumer side of the market, on what is known about how consumers search for needed information, and on how this impacts the behavior of markets. The author discusses three broad strands of this literature -- normative models of search and their application to consumer search; empirical studies of the search process; and implications of consumer search for the behavior of markets, including pricing, advertising and retailing. In general, the author examines external search -- the search for information from sources other than memory. Particular attention is paid to the impact of the Internet on markets. Consumer Search Behavior and its Effect on Markets also examines the broader issues about alternatives considered, sources consulted, extent of consumer knowledge, and the impact of these factors on markets and marketing institutions.
Author: Minakshi Trivedi
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
While consumer screening of nutritional information as well as general health concerns have been on the rise, whether such concerns are reflected in purchasing behavior is not quite as certain. We postulate this disconnect between health concerns (more specifically concerns with fat, salt and sugar elements) and consumption behavior to stem from balancing behaviors exhibited by consumers. We address this issue through three core questions: (1) Are there certain segments of consumers who, given a focal health element, balance their purchases between healthy and regular versions of products across categories? (2) Is this balancing behavior consistent across different elements of health concern? And, (3) is a consumer's stated health orientation consistent with actual purchase behavior? We estimate a multi-category product choice model nested within an augmented latent class structure using scanner panel data and supplemented with survey based constructs obtained from the same consumers. We find evidence of significant balancing behavior across segments and also across different health elements. We show that our findings have significant implications for retail and manufacturer strategy as well as for public policy.
