Preference for Variety
AbstractWe consider a decision maker who enjoys choosing from a varied set of alternatives. Building on behavioral evidence, we propose testable axioms which characterize preference for variety, and provide a representation theorem. We go on to illustrate the potential effects of preference for variety in a model of retailing. Consumer welfare may be decreasing in the competitiveness of the retailing sector as competition eliminates the scope for retailers to offer variety. Mainstream consumers with a preference for variety and consumers with eccentric tastes enjoy a symbiotic relationship. Competition over mainstream consumers makes retailers offer more exotic goods, while eccentric consumers subsidize their carrying costs.
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Bibliographic InfoPaper provided by Banco de México in its series Working Papers with number 2011-13.
Date of creation: Dec 2011
Date of revision:
Preferences; variety; representation theorem; retail; competition.;
Other versions of this item:
- D0 - Microeconomics - - General
- D03 - Microeconomics - - General - - - Behavioral Microeconomics; Underlying Principles
- D4 - Microeconomics - - Market Structure and Pricing
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-12-13 (All new papers)
- NEP-COM-2011-12-13 (Industrial Competition)
- NEP-MIC-2011-12-13 (Microeconomics)
- NEP-MKT-2011-12-13 (Marketing)
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