Noncompensatory Consideration and Compensatory Choice: an Application to Stackelberg Competition

Mauro Papi

doi:10.1007/s40505-013-0026-0

Noncompensatory Consideration and Compensatory Choice: an Application to Stackelberg Competition

Mauro Papi

Economics

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Abstract

Unlike standard models of choice, experimental evidence suggests that individuals avoid tradeoffs when choice problems are complex. I analyze the implications of consumers using noncompensatory choice heuristics in a simple Stackelberg game in which firms offer menus of multi-attribute alternatives and influence the attribute considered to be salient by consumers via marketing. I illustrate that there is a tight link between optimal menu design and marketing strategies in equilibrium and briefly discuss the choice-theoretic properties of the consumer's choice procedure.

Original language	English
Pages (from-to)	53-63
Number of pages	11
Journal	Economic Theory Bulletin
Volume	2
Issue number	1
Early online date	7 Jan 2014
DOIs	https://doi.org/10.1007/s40505-013-0026-0
Publication status	Published - Apr 2014

Keywords

bounded rationality
compensatory
Stackelberg
Noncompensatory choice heuristics

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Compensatory vs Noncompensatory\Submission
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Mauro Papi
- Business School, Economics - Senior Lecturer
Person: Academic

Cite this

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title = "Noncompensatory Consideration and Compensatory Choice: an Application to Stackelberg Competition",

abstract = "Unlike standard models of choice, experimental evidence suggests that individuals avoid tradeoffs when choice problems are complex. I analyze the implications of consumers using noncompensatory choice heuristics in a simple Stackelberg game in which firms offer menus of multi-attribute alternatives and influence the attribute considered to be salient by consumers via marketing. I illustrate that there is a tight link between optimal menu design and marketing strategies in equilibrium and briefly discuss the choice-theoretic properties of the consumer's choice procedure.",

keywords = "bounded rationality, compensatory, Stackelberg, Noncompensatory choice heuristics",

author = "Mauro Papi",

note = "I would like to thank Ran Spiegler for his helpful suggestions. I am also grateful to Miguel Angel Ballester, Johannes Hoerner, Philippe Jehiel, Erika Magnago, Paola Manzini, Marco Mariotti, William Neilson, an anonymous referee, the editor Nicholas C. Yannelis, and the seminar audience at Aberdeen and UCL for their comments. Any error is my own responsibility.",

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N1 - I would like to thank Ran Spiegler for his helpful suggestions. I am also grateful to Miguel Angel Ballester, Johannes Hoerner, Philippe Jehiel, Erika Magnago, Paola Manzini, Marco Mariotti, William Neilson, an anonymous referee, the editor Nicholas C. Yannelis, and the seminar audience at Aberdeen and UCL for their comments. Any error is my own responsibility.

PY - 2014/4

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N2 - Unlike standard models of choice, experimental evidence suggests that individuals avoid tradeoffs when choice problems are complex. I analyze the implications of consumers using noncompensatory choice heuristics in a simple Stackelberg game in which firms offer menus of multi-attribute alternatives and influence the attribute considered to be salient by consumers via marketing. I illustrate that there is a tight link between optimal menu design and marketing strategies in equilibrium and briefly discuss the choice-theoretic properties of the consumer's choice procedure.

AB - Unlike standard models of choice, experimental evidence suggests that individuals avoid tradeoffs when choice problems are complex. I analyze the implications of consumers using noncompensatory choice heuristics in a simple Stackelberg game in which firms offer menus of multi-attribute alternatives and influence the attribute considered to be salient by consumers via marketing. I illustrate that there is a tight link between optimal menu design and marketing strategies in equilibrium and briefly discuss the choice-theoretic properties of the consumer's choice procedure.

KW - bounded rationality

KW - compensatory

KW - Stackelberg

KW - Noncompensatory choice heuristics

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JO - Economic Theory Bulletin

JF - Economic Theory Bulletin

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ER -

Noncompensatory Consideration and Compensatory Choice: an Application to Stackelberg Competition

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Mauro Papi

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