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Role of Forgetting in Memory-Based Choice Decisions: A Structural Model

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  • Nitin Mehta

    ()

  • Surendra Rajiv

    ()

  • Kannan Srinivasan

    ()

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    Abstract

    We propose a structural model to investigate the impact of forgetting on consumers' brand choice decisions in frequently purchased products. Forgetting results in consumers imperfectly recalling their prior brand evaluations when making a purchase decision in the category. We conceptualize the imperfect recall by positing that consumers recall their prior evaluations with noise. Based on prior research in the behavioral area, we characterize the extent of forgetting as an increasing and concave function of time. Our framework generates analytical results on the impact of forgetting on consumers' brand evaluations and their consequent purchase behavior. We calibrate our model using scanner panel data for liquid detergents. Furthermore, we obtain insights into the consumers' extent of forgetting in the category, extent of learning, predicted price elasticities and implications on state dependence and habit persistence. Our results underscore the importance of modeling consumers' ability to recall only imperfectly. Copyright Kluwer Academic Publishers 2004

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    File URL: http://hdl.handle.net/10.1023/B:QMEC.0000027775.65062.50
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    Bibliographic Info

    Article provided by Springer in its journal Quantitative Marketing and Economics.

    Volume (Year): 2 (2004)
    Issue (Month): 2 (June)
    Pages: 107-140

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    Handle: RePEc:kap:qmktec:v:2:y:2004:i:2:p:107-140

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    Web page: http://www.springerlink.com/link.asp?id=111240

    Related research

    Keywords: Bayesian learning; forgetting; quality uncertainty; structural modeling; econometric estimation and memory-based choice decisions;

    References

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    1. Nitin Mehta & Surendra Rajiv & Kannan Srinivasan, 2003. "Price Uncertainty and Consumer Search: A Structural Model of Consideration Set Formation," Marketing Science, INFORMS, vol. 22(1), pages 58-84, June.
    2. Peter M. Guadagni & John D. C. Little, 1983. "A Logit Model of Brand Choice Calibrated on Scanner Data," Marketing Science, INFORMS, vol. 2(3), pages 203-238.
    3. Tülin Erdem & Michael P. Keane, 1996. "Decision-Making Under Uncertainty: Capturing Dynamic Brand Choice Processes in Turbulent Consumer Goods Markets," Marketing Science, INFORMS, vol. 15(1), pages 1-20.
    4. Lynch, John G, Jr & Marmorstein, Howard & Weigold, Michael F, 1988. " Choices from Sets Including Remembered Brands: Use of Recalled Attributes and Prior Overall Evaluations," Journal of Consumer Research, University of Chicago Press, vol. 15(2), pages 169-84, September.
    5. Biehal, Gabriel & Chakravarti, Dipankar, 1983. " Information Accessibility as a Moderator of Consumer Choice," Journal of Consumer Research, University of Chicago Press, vol. 10(1), pages 1-14, June.
    6. Park, C Whan & Iyer, Easwar S & Smith, Daniel C, 1989. " The Effects of Situational Factors on In-Store Grocery Shopping Behavior: The Role of Store Environment and Time Available for Shopping," Journal of Consumer Research, University of Chicago Press, vol. 15(4), pages 422-33, March.
    7. Miller, Robert A, 1984. "Job Matching and Occupational Choice," Journal of Political Economy, University of Chicago Press, vol. 92(6), pages 1086-120, December.
    8. Sendhil Mullainathan, 2002. "A Memory-Based Model Of Bounded Rationality," The Quarterly Journal of Economics, MIT Press, vol. 117(3), pages 735-774, August.
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    Cited by:
    1. Villas-Boas, Sofia B. & Villas-Boas, J. Miguel, 2006. "Learning, forgetting, and sales," CUDARE Working Paper Series 1020, University of California at Berkeley, Department of Agricultural and Resource Economics and Policy.
    2. Ching, Andrew & Ishihara, Masakazu, 2007. "The Effects of Detailing on Prescribing Decisions under Two-Sided Learning," MPRA Paper 4935, University Library of Munich, Germany.
    3. Andrew Ching & Masakazu Ishihara, 2010. "The effects of detailing on prescribing decisions under quality uncertainty," Quantitative Marketing and Economics, Springer, vol. 8(2), pages 123-165, June.

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