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Optimal Effort in Consumer Choice: Theory and Experimental Evidence for Binary Choice

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  • Conlon, B.J.
  • Dellaert, B.G.C.
  • Soest, A.H.O. van

    (Tilburg University, Center for Economic Research)

Abstract

This paper develops a theoretical model of optimal effort in consumer choice.The model extends previous consumer choice models in that the consumer not only chooses a product, but also decides how much effort to apply to a given choice problem.The model yields a unique optimal level of effort, which depends on the consumer's cost of effort, the expected utility gain of a correct choice, and the complexity of the choice set.We show that the relationship between effort and cost of effort is negative, whereas the relationships between effort and product utility difference and choice task complexity are undetermined.To resolve this theoretical ambiguity and to explore our model empirically, we investigate the relationships between effort and cost of effort, product utility difference and choice task complexity using data from a conjoint choice study of two-alternative consumer restaurant choices.Response time is used as a proxy for effort and consumer involvement measures capture individual differences in (relative) cost of effort and perceived complexity.Effort is explained using the (estimated) utility difference between alternatives, the number of elementary information processes (EIP's) required to solve the choice problem optimally and respondent specific cost of effort and complexity perceptions.The predictions of the theoretical model are supported by our empirical findings.Response time increases with lower cost of effort and greater perceived complexity (i.e. higher involvement).We find that across the range of choice tasks in our survey, effort increases linearly with smaller product utility differences and greater choice task complexity.

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Bibliographic Info

Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 2001-51.

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Date of creation: 2001
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Handle: RePEc:dgr:kubcen:200151

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Related research

Keywords: consumer choice; bounded rationality;

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References

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  1. Swait, Joffre & Adamowicz, Wiktor, 2001. "Choice Environment, Market Complexity, and Consumer Behavior: A Theoretical and Empirical Approach for Incorporating Decision Complexity into Models of Consumer Choice," Organizational Behavior and Human Decision Processes, Elsevier, vol. 86(2), pages 141-167, November.
  2. Gregory W. Fischer & Mary Frances Luce & Jianmin Jia, 2000. "Attribute Conflict and Preference Uncertainty: Effects on Judgment Time and Error," Management Science, INFORMS, vol. 46(1), pages 88-103, January.
  3. Bettman, James R. & Johnson, Eric J. & Payne, John W., 1990. "A componential analysis of cognitive effort in choice," Organizational Behavior and Human Decision Processes, Elsevier, vol. 45(1), pages 111-139, February.
  4. Eric J. Johnson & John W. Payne, 1985. "Effort and Accuracy in Choice," Management Science, INFORMS, vol. 31(4), pages 395-414, April.
  5. Moorthy, Sridhar & Ratchford, Brian T & Talukdar, Debabrata, 1997. " Consumer Information Search Revisited: Theory and Empirical Analysis," Journal of Consumer Research, University of Chicago Press, vol. 23(4), pages 263-77, March.
  6. Shugan, Steven M, 1980. " The Cost of Thinking," Journal of Consumer Research, University of Chicago Press, vol. 7(2), pages 99-111, Se.
  7. Ariel Rubinstein, 2005. "Modeling Bounded Rationality," Levine's Bibliography 784828000000000152, UCLA Department of Economics.
  8. Mittal, Banwari & Lee, Myung-Soo, 1989. "A causal model of consumer involvement," Journal of Economic Psychology, Elsevier, vol. 10(3), pages 363-389, November.
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