Journal Article

Consideration Sets and Competitive Marketing

Kfir Eliaz and Ran Spiegler

in The Review of Economic Studies

Published on behalf of Review of Economic Studies Ltd

Volume 78, issue 1, pages 235-262
Published in print January 2011 | ISSN: 0034-6527
Published online January 2011 | e-ISSN: 1467-937X | DOI: http://dx.doi.org/10.1093/restud/rdq016
Consideration Sets and Competitive Marketing

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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.

Keywords: Marketing; Advertising; Consideration sets; Bounded rationality; Limited attention; Persuasion; Product display; D03; D11; D21; D43

Journal Article.  14983 words. 

Subjects: Microeconomics ; Household Behaviour and Family Economics ; Production and Organizations ; Market Structure and Pricing

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