Consideration Sets and Competitive Marketing

Eliaz, Kfir and Spiegler, Ran (2006): Consideration Sets and Competitive Marketing.

Abstract

We study a market model in which competing firms use costly marketing devices to influence the set of alternatives which consumers perceive as relevant. Consumers in our model are boundedly rational in the sense that they have an imperfect perception of what is relevant to their decision problem. They apply well-defined preferences to a "consideration set", which is a function of the marketing devices employed by the firms. We examine the implications of this behavioral model in the context of a competitive market model, particularly on industry profits, vertical product differentiation, the use of marketing devices and consumers' conversion rates.

• Item Type: MPRA Paper
• Language: English
• Keywords: consideration sets, marketing, industrial organization, advertising, default bias, inertia, product display, bounded rationality, limited attention, persuasion
• Subjects: D - Microeconomics > D0 - General > D03 - Behavioral Microeconomics: Underlying Principles; C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C79 - Other; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L13 - Oligopoly and Other Imperfect Markets; M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M3 - Marketing and Advertising > M37 - Advertising; D - Microeconomics > D4 - Market Structure, Pricing, and Design > D43 - Oligopoly and Other Forms of Market Imperfection

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