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Preference for Variety

Author

Listed:
  • Kaiser Karen

    () (Banco de México)

  • Schwabe Rainer

    () (Banco de México)

Abstract

We 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.

Suggested Citation

  • Kaiser Karen & Schwabe Rainer, 2012. "Preference for Variety," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 12(1), pages 1-32, January.
  • Handle: RePEc:bpj:bejtec:v:12:y:2012:i:1:n:3
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • D0 - Microeconomics - - General
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D4 - Microeconomics - - Market Structure, Pricing, and Design

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