Preference for Variety

Kaiser Karen and Rainer Schwabe

No 2011-13, Working Papers from Banco de México

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.

JEL-codes: D0 D01 D4 (search for similar items in EconPapers)
Date: 2011-12
New Economics Papers: this item is included in nep-com, nep-mic and nep-mkt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Journal Article: Preference for Variety (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:bdm:wpaper:2011-13

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