Integrating Routine, Variety Seeking and Compensatory Choice in a Utility Maximizing Framework
Given the large number of choices that consumers make each day it seems likely that they will generally adopt decision strategies that minimize cognitive effort, particularly with low price products such as most items found in a supermarket. One such strategy may be to simply choose what has been chosen in the past, i.e. to fall into a pattern of routine choices or decisions. In contrast, there may be preferences for variety in markets for low price, highly differentiated goods. We develop a conceptual and empirical model of routine choice, and the factors that result in transitions to two strategies other than routine selection, to wit, utility maximizing choice among available alternatives and a variety seeking strategy. The empirical approach we employ provides a mechanism for the examination of panel data that avoids the state dependence issues present in most applications to these types of data. We apply this framework to the choice of two food products that illustrate the heterogeneity across types of products in decision strategies and routine choice patterns.
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- Jean-Pierre Dubé & Günter J. Hitsch & Peter E. Rossi, 2009.
"State Dependence and Alternative Explanations for Consumer Inertia,"
NBER Working Papers
14912, National Bureau of Economic Research, Inc.
- Jean-Pierre Dubé & Günter J. Hitsch & Peter E. Rossi, 2010. "State dependence and alternative explanations for consumer inertia," RAND Journal of Economics, RAND Corporation, vol. 41(3), pages 417-445.
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