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Buridanic competition

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  • Bachi, Benjamin
  • Spiegler, Ran

Abstract

We analyze a model of two-attribute competition for a decision maker who follows a non-compensatory choice procedure that only responds to ordinal rankings along the two dimensions. The decision maker has an outside option that functions as a default alternative. In the absence of a dominant alternative, the decision maker may stick to the default even if it is dominated – capturing the phenomenon of choice procrastination in the presence of difficult choices. We show that the prevalence of difficult-choice situations in equilibrium is related to the magnitude of the choice procrastination effect. In general, features of the choice procedure that are typically viewed as biases tend to “protect” the decision maker, in the sense that they encourage competitors to offer higher-value alternatives in equilibrium. We discuss the potential implications of this analysis for recent discussions of “default architecture”.

Suggested Citation

  • Bachi, Benjamin & Spiegler, Ran, 2018. "Buridanic competition," Games and Economic Behavior, Elsevier, vol. 107(C), pages 298-315.
    • Handle: RePEc:eee:gamebe:v:107:y:2018:i:c:p:298-315
    DOI: 10.1016/j.geb.2017.10.024
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    Cited by:

    1. Ronayne, David & Brown, Gordon D.A., 2016. "Multi-Attribute Decision By Sampling : An Account Of The Attraction, Compromise And Similarity Effects," Economic Research Papers 269322, University of Warwick - Department of Economics.
    2. Gu, Yiquan & Rasch, Alexander & Wenzel, Tobias, 2022. "Consumer salience and quality provision in (un)regulated public service markets," Regional Science and Urban Economics, Elsevier, vol. 93(C).
    3. Mauro Papi, 2022. "‘What is important is seldom urgent and what is urgent is seldom important’: a study of the strategic implications of the urgency effect in a competitive setting," Economic Theory Bulletin, Springer;Society for the Advancement of Economic Theory (SAET), vol. 10(2), pages 313-332, October.
    4. Michael Grubb, 2015. "Failing to Choose the Best Price: Theory, Evidence, and Policy," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 47(3), pages 303-340, November.
    5. Wisnicki, Bartlomiej, 2022. "Consumer inertia fosters product quality," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 96(C).
    6. Ran Spiegler, 2015. "On the Equilibrium Effects of Nudging," The Journal of Legal Studies, University of Chicago Press, vol. 44(2), pages 389-416.
    7. Gu, Yiquan & Wenzel, Tobias, 2020. "Curbing obfuscation: Empower consumers or regulate firms?," International Journal of Industrial Organization, Elsevier, vol. 70(C).
    8. Andreas Hefti & Shuo Liu, 2016. "Targeted information and limited attention," ECON - Working Papers 230, Department of Economics - University of Zurich, revised Dec 2019.
    9. Gerasimou, Georgios & Papi, Mauro, 2018. "Duopolistic competition with choice-overloaded consumers," European Economic Review, Elsevier, vol. 101(C), pages 330-353.
    10. Benjamin Bachi, 2016. "Competition with price similarities," Economic Theory Bulletin, Springer;Society for the Advancement of Economic Theory (SAET), vol. 4(2), pages 277-290, October.
    11. Francisco Silva & Samir Mamadehussene, 2020. "The Equivalence Between Sequential and Simultaneous Firm Decisions," Documentos de Trabajo 541, Instituto de Economia. Pontificia Universidad Católica de Chile..

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    More about this item

    Keywords

    Trade-off avoidance; Competition; Choice complexity; Default bias; Behavioral industrial organization; Multi-attribute products;
    All these keywords.

    JEL classification:

    • C79 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Other
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General

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