Consumer Choice Under Limited Attention When Alternatives Have Different Information Costs
| Autor: | Yalcin Akcay, Tamer Boyaci, Frank Huettner |
|---|---|
| Rok vydání: | 2019 |
| Předmět: |
Discrete choice
050208 finance 021103 operations research Revenue management Consumer choice 05 social sciences 0211 other engineering and technologies Face (sociological concept) 02 engineering and technology Management Science and Operations Research Computer Science Applications Business economics Complete information 0502 economics and business Information costs Business Information acquisition Marketing |
| Zdroj: | Operations Research. 67:671-699 |
| ISSN: | 1526-5463 0030-364X |
| DOI: | 10.1287/opre.2018.1828 |
| Popis: | Consumers often do not have complete information about the choices they face and, therefore, have to spend time and effort acquiring information. Because 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 the consumer 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 nonuniform 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, nonuniform information costs can lead to situations in which it is disadvantageous for the seller to provide easier access to information for a particular product and to situations in which 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. |
| Databáze: | OpenAIRE |
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