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Perfect Information vs Random Investigation: Safety Guidelines for a Consumer in the Jungle of Product Differentiation

Author

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  • Alessio Emanuele Biondo
  • Alfio Giarlotta
  • Alessandro Pluchino
  • Andrea Rapisarda

Abstract

We present a graph-theoretic model of consumer choice, where final decisions are shown to be influenced by information and knowledge, in the form of individual awareness, discriminating ability, and perception of market structure. Building upon the distance-based Hotelling’s differentiation idea, we describe the behavioral experience of several prototypes of consumers, who walk a hypothetical cognitive path in an attempt to maximize their satisfaction. Our simulations show that even consumers endowed with a small amount of information and knowledge may reach a very high level of utility. On the other hand, complete ignorance negatively affects the whole consumption process. In addition, rather unexpectedly, a random walk on the graph reveals to be a winning strategy, below a minimal threshold of information and knowledge.

Suggested Citation

  • Alessio Emanuele Biondo & Alfio Giarlotta & Alessandro Pluchino & Andrea Rapisarda, 2016. "Perfect Information vs Random Investigation: Safety Guidelines for a Consumer in the Jungle of Product Differentiation," PLOS ONE, Public Library of Science, vol. 11(1), pages 1-26, January.
  • Handle: RePEc:plo:pone00:0146389
    DOI: 10.1371/journal.pone.0146389
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    References listed on IDEAS

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