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Preference for Variety

Author

Listed:
  • Karen Kaiser
  • Rainer Schwabe

Abstract

We consider a decision maker who enjoys choosing from a varied set of alternatives. Building on behavioral evidence, we propose testable axioms which characterize preference for variety, and provide a representation theorem. We go on to illustrate the potential effects of preference for variety in a model of retailing. Consumer welfare may be decreasing in the competitiveness of the retailing sector as competition eliminates the scope for retailers to offer variety. Mainstream consumers with a preference for variety and consumers with eccentric tastes enjoy a symbiotic relationship. Competition over mainstream consumers makes retailers offer more exotic goods, while eccentric consumers subsidize their carrying costs.

Suggested Citation

  • Karen Kaiser & Rainer Schwabe, 2011. "Preference for Variety," Working Papers 2011-13, Banco de México.
  • Handle: RePEc:bdm:wpaper:2011-13
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    File URL: http://www.banxico.org.mx/publications-and-press/banco-de-mexico-working-papers/%7B58932758-A1F0-AE0D-B605-F20EDA25AA52%7D.pdf
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    References listed on IDEAS

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    1. repec:gam:jgames:v:8:y:2017:i:2:p:22-:d:99106 is not listed on IDEAS

    More about this item

    Keywords

    Preferences; variety; representation theorem; retail; competition.;

    JEL classification:

    • D0 - Microeconomics - - General
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D4 - Microeconomics - - Market Structure, Pricing, and Design

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