Skip to content

Research at St Andrews

Duopolistic competition with choice-overloaded consumers

Research output: Contribution to journalArticle

Author(s)

Georgios Gerasimou, Mauro Papi

School/Research organisations

Abstract

A large body of empirical work has suggested the existence of a “choice overload” effect in consumer decision making: when faced with large menus of alternatives, decision makers often avoid/indefinitely defer choice. An explanation for the occurrence of this effect is that consumers try to escape the higher cognitive effort that is associated with making an active choice in large menus. Building on this explanation, we propose and analyse a model of duopolistic competition where firms compete in menu design in the presence of a consumer population with heterogeneous preferences and overload menu-size thresholds. The firms’ strategic trade-off is between offering a large menu in order to match the preferences of as many consumers as possible, and offering
a small menu in order to avoid losing choice-overloaded consumers to their rival or driving them out of the market altogether. We study the equilibrium outcomes in this market and establish some (im)possibility results and characterizations under a variety of assumptions. We also propose a measure of market effectiveness that may be thought of as a proxy for consumer welfare in this environment, and use it alongside our model to provide a critical perspective on regulations that cap the number of products that firms could offer.
Close

Details

Original languageEnglish
Pages (from-to)330-353
JournalEuropean Economic Review
Volume101
Early online date16 Oct 2017
DOIs
Publication statusPublished - Jan 2018

    Research areas

  • Choice overload, Bounded rationality , Duopolistic competition, Behavioural industrial organization

Discover related content
Find related publications, people, projects and more using interactive charts.

View graph of relations

Related by author

  1. Dominance solvable multicriteria games with incomplete preferences

    Gerasimou, G., Dec 2019, In : Economic Theory Bulletin. 7, 2, p. 165-171 7 p.

    Research output: Contribution to journalArticle

  2. Prest: open-source software for computational revealed preference analysis

    Gerasimou, G. & Tejiscak, M., 21 Oct 2018, In : Journal of Open Source Software. 3, 30, 1015.

    Research output: Contribution to journalArticle

  3. Prest: open-source software for computational revealed preference analysis (software)

    Gerasimou, G. & Tejiscak, M., 20 Oct 2018

    Research output: Non-textual formSoftware

  4. Indecisiveness, undesirability and overload revealed through rational choice deferral

    Gerasimou, G., Sep 2018, In : The Economic Journal. 128, 614, p. 2450-2479

    Research output: Contribution to journalArticle

  5. On the indifference relation in Bewley preferences

    Gerasimou, G., Mar 2018, In : Economics Letters. 164, p. 24-26 3 p.

    Research output: Contribution to journalArticle

Related by journal

  1. Sovereign debt guarantees and default: Lessons from the UK and Ireland, 1920-1938

    Foley-Fisher, N. & McLaughlin, E., Aug 2016, In : European Economic Review. 87, p. 272-286

    Research output: Contribution to journalArticle

  2. Evaluating international financial integration under leverage constraints

    Devereux, M. B. & Sutherland, A., Apr 2011, In : European Economic Review. 55, 3, p. 427-442 16 p.

    Research output: Contribution to journalArticle

  3. Tax progressivity, income distribution and tax non-compliance

    Damjanovic, T. & Ulph, D. T., May 2010, In : European Economic Review. 54, 4, p. 594-607 14 p.

    Research output: Contribution to journalArticle

  4. Liquidity traps, learning and stagnation

    Evans, G. W., Guse, E. & Honkapohja, S., Nov 2008, In : European Economic Review. 52, 8, p. 1438-1463 26 p.

    Research output: Contribution to journalArticle

ID: 251387453

Top