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The Role of Knowledge in Choice, Valuation, and Outcomes for Multi-Attribute Goods

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  • Gustafson Christopher R.

    (Department of Agricultural Economics, University of Nebraska-Lincoln, 314A Filley Hall, Lincoln, NE 68583, USA)

Abstract

Though the number of choices that individuals routinely must make has proliferated, comparatively little attention has been paid in the economics literature to consumer – compared to expert – knowledge, and its role in facilitating valuation and affecting choice outcomes. In this article, I review relevant work in economics, and then focus on research on knowledge that has used wine as the object of interest. Psychologists and sensory scientists have studied the role of wine expertise in sensory perception and categorization, and I review this literature to suggest how knowledge might also affect valuation and choice in the wine market. I finish by describing three recent studies on the role of knowledge in consumer valuation, information use, and choice outcomes in the American wine market. All three studies provide strong evidence that consumer knowledge is an important variable to consider in markets for differentiated products. Knowledge allows people to make greater use of objective label information when valuing wine in an experimental auction context, with high knowledge participants updating their bids more after participants received new information. In a field experiment, we find that high knowledge consumers derive greater value when selecting wines from a substantial inventory than do low knowledge consumers.

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  • Gustafson Christopher R., 2015. "The Role of Knowledge in Choice, Valuation, and Outcomes for Multi-Attribute Goods," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 13(1), pages 33-43, January.
    • Handle: RePEc:bpj:bjafio:v:13:y:2015:i:1:p:33-43:n:5
    DOI: 10.1515/jafio-2015-0019
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    2. Syed Imran Ali Meerza & Christopher R Gustafson, 2019. "Does prior knowledge of food fraud affect consumer behavior? Evidence from an incentivized economic experiment," PLOS ONE, Public Library of Science, vol. 14(12), pages 1-14, December.
    3. Jianyu Yu & Zohra Bouamra-Mechemache & Angelo Zago, 2018. "What is in a Name? Information, Heterogeneity, and Quality in a Theory of Nested Names," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 100(1), pages 286-310.
    4. Lionel Valenzuela & Rodrigo Ortega & Daniel Moscovici & Jeff Gow & Adeline Alonso Ugaglia & Radu Mihailescu, 2022. "Consumer Willingness to Pay for Sustainable Wine—The Chilean Case," Sustainability, MDPI, vol. 14(17), pages 1-14, September.

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