WebMay 25, 2024 · We model customer choice based on the theory of rational inattention in the economics literature, which enables us to capture not only the impact of true quality and price, but also the intricate effects of customer’s prior beliefs and cost of information acquisition and processing. WebIn our model, inattentive consumers are unsophisticated and make no attempt to infer quality from a supplier's price.2 Indeed, a firm's price completely reveals its choice of quality in equilibrium, and a Bayesian consumer could infer quality even if she cannot observe it …
Inattentive Consumers and Product Quality - LMU
WebJul 5, 2012 · Inattentive Consumers and Product Quality Mark Armstrong Yongmin Chen Abstract This paper studies a model in which some consumers shop on the basis of price alone, without attention to potential differences in product quality. A firm may offer a low-quality product to exploit these inattentive consumers. WebThe spillover amounts to an average drop of $2,057 in consumer valuations of these manufacturers’ vehicles and a 34.6% reduction in their annual sales. We substantiate our interpretation that the estimates reflect a reputation spillover using data on internet search behavior and direct measures of consumer sentiment from Twitter. novartis q1 earnings
MPRA Munich Personal RePEc Archive Inattentive Consumers and …
WebThis paper examines the role of consumer preferences, costs, and price competition in determining the competitive product strategy of a firm. In the model studied here, there are two identical firms competing on product quality and price. They face consumers who prefer a higher quality product to a lower quality product, but differ in how much ... WebThis paper studies a model in which some consumers shop on the basis of price alone, without attention to potential differences in product quality. A firm may offer a low-quality product to exploit these inattentive consumers. In the unique symmetric equilibrium of the model, firms choose prices with mixed strategies, similarly to Varian (1980) in which … WebA firm may offer a low-quality product to exploit these inattentive consumers. In the unique symmetric equilibrium of the model, firms choose prices with mixed strategies, similarly … how to soft boil eggs in shell