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Preference for Variety

Author

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  • Kaiser Karen
  • Schwabe Rainer

Abstract

We consider a decision maker who enjoys choosing from a varied set of alternatives. Building on behavioral evidence, we propose testable axioms which characterize preference for variety, and provide a representation theorem. We go on to illustrate the potential effects of preference for variety in a model of retailing. Consumer welfare may be decreasing in the competitiveness of the retailing sector as competition eliminates the scope for retailers to offer variety. Mainstream consumers with a preference for variety and consumers with eccentric tastes enjoy a symbiotic relationship. Competition over mainstream consumers makes retailers offer more exotic goods, while eccentric consumers subsidize their carrying costs.

Suggested Citation

  • Kaiser Karen & Schwabe Rainer, 2011. "Preference for Variety," Working Papers 2011-13, Banco de México.
    • Handle: RePEc:bdm:wpaper:2011-13
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    File URL: https://www.banxico.org.mx/publications-and-press/banco-de-mexico-working-papers/%7B58932758-A1F0-AE0D-B605-F20EDA25AA52%7D.pdf
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    References listed on IDEAS

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    Cited by:

    1. Joaquin Gómez-Miñambres & Eric Schniter, 2017. "Emotions and Behavior Regulation in Decision Dilemmas," Games, MDPI, vol. 8(2), pages 1-25, May.

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    More about this item

    JEL classification:

    • D0 - Microeconomics - - General
    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles

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