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Choice Environment, Market Complexity and Consumer Behavior: A Theoretical and Empirical Approach for Incorporating Decision Complexity into Models of Consumer Choice

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  • Swait, Joffre
  • Adamowicz, Wiktor L.

Abstract

Most empirical models of consumer choice assume that the decision-maker assesses all alternatives and information in a perfect information processing sense. The complexity of the choice environment, the ability of the individual to make complex decisions and the effect of choice context on the decision strategy, are generally not considered in statistical model development. One of the reasons for this omission is that theoretical literature on choice complexity and imperfect ability to choose has not been translated into empirical methods that permit such considerations in econometric analysis. In this paper we outline a theoretical model that considers task complexity, effort applied by the consumer, ability to choose, and choice. We then construct a measure of task complexity and incorporate this in a random utility model. We employ this model in the analysis of a number of data series. Our findings suggest that task complexity does affect inferences about choice model parameters and that context effects, like complexity, have a systematic effect on the parameters of econometric models of choice. Not accounting for complexity or context effects will result in significant bias in the estimated preference parameters.

Suggested Citation

  • Swait, Joffre & Adamowicz, Wiktor L., 1999. "Choice Environment, Market Complexity and Consumer Behavior: A Theoretical and Empirical Approach for Incorporating Decision Complexity into Models of Consumer Choice," Staff Paper Series 24093, University of Alberta, Department of Resource Economics and Environmental Sociology.
  • Handle: RePEc:ags:ualbsp:24093
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    References listed on IDEAS

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    1. Swait, Joffre & Ben-Akiva, Moshe, 1987. "Empirical test of a constrained choice discrete model: Mode choice in São Paulo, Brazil," Transportation Research Part B: Methodological, Elsevier, vol. 21(2), pages 103-115, April.
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    12. Keller, Kevin Lane & Staelin, Richard, 1987. " Effects of Quality and Quantity of Information on Decision Effectiveness," Journal of Consumer Research, Oxford University Press, vol. 14(2), pages 200-213, September.
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