Consideration sets and competitive marketing

Kfir Eliaz*, Ran Spiegler

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

125 Scopus citations

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 behavioural 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.

Original languageEnglish
Pages (from-to)235-262
Number of pages28
JournalReview of Economic Studies
Volume78
Issue number1
DOIs
StatePublished - 1 Jan 2011
Externally publishedYes

Funding

FundersFunder number
Seventh Framework Programme230251
Economic and Social Research Council
European Research Council
Israel Science Foundation0610114022

    Keywords

    • Advertising
    • Bounded rationality
    • Consideration sets
    • Limited attention
    • Marketing
    • Persuasion
    • Product display

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