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Consumer inertia fosters product quality

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  • Wisnicki, Bartlomiej

Abstract

We analyze a market wherein consumers display inertia while having limited information about a product. We assume that consumers rely on anecdotal information during product assessment. Furthermore, they tend to overvalue and stick to their previous choice as long as it is satisfactory. We investigate the impact of inertia on market equilibrium. Although inertia raises firms’ monopoly power, it also creates incentives for quality increase and may enhance consumer and market welfare.

Suggested Citation

  • Wisnicki, Bartlomiej, 2022. "Consumer inertia fosters product quality," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 96(C).
    • Handle: RePEc:eee:soceco:v:96:y:2022:i:c:s2214804321001579
    DOI: 10.1016/j.socec.2021.101817
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    More about this item

    Keywords

    Consumer inertia; Anecdotal reasoning; Bounded rationality; Price competition;
    All these keywords.

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

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