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Behavioral Consumers in Industrial Organization: An Overview

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Abstract

This paper overviews three primary branches of the industrial organization literature with behavioral consumers. The literature is organized according to whether consumers: (1) have non-standard preferences; (2) are overconfident or otherwise biased such that they systematically misweight different dimensions of price and other product attributes; or (3) fail to choose the best price due to suboptimal search, confusion comparing prices, or excessive inertia. The importance of consumer heterogeneity and equilibrium effects are also highlighted along with recent empirical work. Copyright Springer Science+Business Media New York 2015

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  • Michael Grubb, 2015. "Behavioral Consumers in Industrial Organization: An Overview," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 47(3), pages 247-258, November.
  • Handle: RePEc:kap:revind:v:47:y:2015:i:3:p:247-258
    DOI: 10.1007/s11151-015-9477-9
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    More about this item

    Keywords

    Behavioral industrial organization; Bounded rationality; Loss aversion; Present bias; Overconfidence; Exploitative contracting; Search; Obfuscation; Switching; Inertia; D41; D42; D43; D81; D82; D83; L11; L12; L13; L15;
    All these keywords.

    JEL classification:

    • D41 - Microeconomics - - Market Structure, Pricing, and Design - - - Perfect Competition
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

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