Sequentially-Revealed Price Information and Consumer Choice
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This article aims to explain an expenditure-minimizing consumer's behavioral pattern in the situation that the prices of a good are sequentially revealed. There are some markets in which consumers usually have limited price information. A general solution and three other possible solutions are proposed and compared. The first solution or strategy turns out to be most ideal on the grounds that the average price converges to the minimum price and the standard deviation also converges to zero as the number of sellers increases to infinity. This is also supported by the simulation results. However, the most appropriate choices made by consumers depend on their risk attitudes and the number of sellers. It is because there exists the trade-off relationship between the average price and the variance. The findings through the simplified model of this study, along with further research on this topic in the future, are expected to extend to a complementary theoretical foundation of consumer choice.
Abstract
This article aims to explain an expenditure-minimizing consumer's behavioral pattern in the situation that the prices of a good are sequentially revealed. There are some markets in which consumers usually have limited price information. A general solution and three other possible solutions are proposed and compared. The first solution or strategy turns out to be most ideal on the grounds that the average price converges to the minimum price and the standard deviation also converges to zero as the number of sellers increases to infinity. This is also supported by the simulation results. However, the most appropriate choices made by consumers depend on their risk attitudes and the number of sellers. It is because there exists the trade-off relationship between the average price and the variance. The findings through the simplified model of this study, along with further research on this topic in the future, are expected to extend to a complementary theoretical foundation of consumer choice.
참고문헌 (12)
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