Monday, January 30, 2012

Preference for Variety

Posted by D. Daniel Sokol

Karen Kaiser and Rainer Schwabe (both Banco de Mexico) address Preference for Variety.

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.

https://lawprofessors.typepad.com/antitrustprof_blog/2012/01/preference-for-variety-.html

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