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The Paradox of Choice: Why More is Good & Too Much is Terrible

Author

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  • Lewis, Daniel
  • Allender, William J.
  • Richards, Timothy J.
  • Hamilton, Stephen F.
  • Park, Sungho

Abstract

Consumer search and product variety have been studied extensively in both the marketing and economics literature for the past 50 years. The idea that consumer have heterogenous search costs which lead some consumers to become more informed about product information than others has been used to explain a number of phenomenon. However, past theoretical models assume that consumers make a single purchase at each shopping occasion and their budget and search costs are all absorbed by that single product purchase. Our paper extends the current literature by allowing for the observation that consumers may make multiple purchases as well as single product purchases. We find that their is an optimal number of products for which the consumer would chose to search, which is critically dependent on the degree to which the consumer becomes satiated by the products, and their preference for variety. What's more, we develop this in a framework amenable to empirical work which directly allows for the estimation of the consumer's satiation and preference for variety parameters.

Suggested Citation

  • Lewis, Daniel & Allender, William J. & Richards, Timothy J. & Hamilton, Stephen F. & Park, Sungho, 2012. "The Paradox of Choice: Why More is Good & Too Much is Terrible," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124485, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea12:124485
    DOI: 10.22004/ag.econ.124485
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    Keywords

    Consumer/Household Economics; Demand and Price Analysis; Marketing;
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