RT Journal Article
T1 Consumer’s response to price distribution and σ-overloadunder time allocation
A1 Álvarez, Francisco
A1 Rey Simo, José Manuel
A1 Sanchis, Raúl G.
AB It has been recently suggested that both the number of options considered by consumers and their satisfaction when shopping respond to changes in the mean and spread of market prices. A structured analysis of those responses is provided in this paper. A new adverse effect related with consumer’s welfare is presented here, namely a consumer that searches exhaustively among all market options – called maximizer – experiences welfare loss when the dispersion of prices is too high. In fact, her welfare exhibits an inverted-U shape with respect to the standard deviation σ of prices so that an increase in price spread produces more welfare for small values of σ but it has a negative effect for larger values of σ. This new phenomenon is termed σ-overload. It is also shown that a consumer that is content with shopping from a reduced sample of options – a satisficer – avoids σ-overload by adapting her search behavior to the increase in spread. A quantitative assessment of consumer’s behavior and welfare with respect to changes in the mean and dispersion of prices under different scenarios is also provided.
PB Elsevier
SN 0377-0427
YR 2016
FD 2016
LK https://hdl.handle.net/20.500.14352/23632
UL https://hdl.handle.net/20.500.14352/23632
LA eng
NO Ministerio de Ciencia e Innovación (MICINN)
DS Docta Complutense
RD 7 may 2024