Consumers Search and the Choice Overload Hypothesis
33 Pages Posted: 3 Nov 2013
Date Written: October 7, 2013
Abstract
In this paper we use an experimental approach to study the relationship between the number of products presented to a consumer and their subsequent search and purchase behavior. By imposing a search cost, and a preference for variety, we induce search behavior in the presence of a preference for variety that leads the participants to make both single, and multiple-purchase decisions. This paper shows that the ability to shop more efficiently allows consumers to focus on finding products that meet their exact specifications in differentiated product categories. With uncertainty over product attributes, no single choice stands out as a clear favorite a priori, so utility rises the more choices are available, but at a decreasing rate. We find that as the size of the consideration set grows, consumers search less and are more apt to purchase, but this effect is highly non-linear. Beyond a certain point, search expands as consumers become unwilling to choose. Retailers can increase the assortment available to persuade a consumer to patronize their store and avoid searching another. However, this does not increase without bound. Eventually, a consumer will be overwhelmed by the number of products offered and search the other store as well, or possibly instead. The degree to which consumers are overburdened by the variety offered exhibits significant heterogeneity among consumers.
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