Competition for Context-Sensitive Consumers
| Autor: | Lydia Mechtenberg, Arno Apffelstaedt |
|---|---|
| Rok vydání: | 2021 |
| Předmět: |
Consumption (economics)
Salience (language) Exploit media_common.quotation_subject Strategy and Management 05 social sciences Upselling Context (language use) Management Science and Operations Research Preference Competition (economics) 0502 economics and business Quality (business) Product (category theory) Business 050207 economics Marketing Anecdotal evidence media_common 050205 econometrics |
| Zdroj: | Management Science. 67:2828-2844 |
| ISSN: | 1526-5501 0025-1909 |
| Popis: | When preferences are sensitive to context, firms may influence purchase decisions by designing the environment of consumption choices. This paper studies how competitive retailers optimally design their product line if preferences at the store depend on whether the choice set draws consumer attention to the quality or price of a product. Before making a purchase decision, a consumer chooses among retailers without (fully) anticipating that her preferences at the store are malleable. We show that this setup can align evidence on retailer marketing practices and the existence of loss leaders with the experimental literature on decoy effects: in equilibrium, retailers use loss leaders to attract the consumer to the store and decoy products to draw consumer attention at the store to more profitable alternatives featuring a higher price (inducing a profitable upsell) or lower production cost (inducing a profitable downsell). We embed and compare the predictions of three recent specifications of choice-set dependent attention—namely, Salience, Focusing, and Relative Thinking. All three specifications predict that firms construct choice environments that utilize decoy effects to up- or downsell the consumer. Because they differ in how attention can be directed using the product line, however, they differ in their predictions of how the decoy will be positioned in the price-quality space. This paper was accepted by Yan Chen, decision analysis. |
| Databáze: | OpenAIRE |
| Externí odkaz: |
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