Preference for Variety

Kaiser Karen and Rainer Schwabe
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Kaiser Karen: Banco de México, kkaiser@banxico.org.mx

The B.E. Journal of Theoretical Economics, 2012, vol. 12, issue 1, 32

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.

Keywords: decision theory; variety; retailing; representation theorem (search for similar items in EconPapers)
Date: 2012
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Working Paper: Preference for Variety (2011)
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DOI: 10.1515/1935-1704.1841

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