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The compromise effect and consumer choice in repeated markets
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Huang, Yu-Chun (2022) The compromise effect and consumer choice in repeated markets. PhD thesis, University of Warwick.
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Official URL: http://webcat.warwick.ac.uk/record=b3860979
Abstract
The compromise effect in consumer choice is widely observed and has been extensively studied. Standard choice theories typically assume that this context-dependent behaviour will disappear if decision makers have a chance to explore all options to learn their true preferences. If this is true, firms will not be able to exploit consumers at equilibrium. This thesis investigates whether, and under what conditions, the compromise effect may exist in equilibrium in repeated markets even when consumers have extensive market experience. It also studies whether the compromise effect can emerge without attribute trade-offs by focusing on one-dimensional cases. Motivated by relative rank theory and the idea of contextual inference, this thesis develops two psychological models in which consumers’ judgements and corresponding choices are influenced both by their “true” preferences and by information that consumers derive from available options in the market. According to relative rank theory, consumers’ evaluations of each option are rank-based and constructed from binary ordinal comparisons within the choice set. Using the two different models, this thesis shows that the one-dimensional compromise effect may arise in equilibrium in repeated markets due to consumers’ perceptions of their own relative position in the population. Computer simulations of the models show that, under certain conditions, a monopolist may be incentivised to exploit consumers by manipulating the context of market options to take advantage of the compromise effect displayed by consumers. This thesis also reports an experiment to test the basic assumptions of the models. It is concluded that existing models of the compromise effect are inadequate in that they typically fail to allow for the possibility that the compromise effect may persist even in equilibrium when consumers have extensive experience and no attribute trade-off occurs.
Item Type: | Thesis (PhD) | ||||
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Subjects: | B Philosophy. Psychology. Religion > BF Psychology H Social Sciences > HF Commerce |
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Library of Congress Subject Headings (LCSH): | Compromise (Ethics), Consumer behavior, Consumers' preferences, Decision making -- Psychological aspects | ||||
Official Date: | January 2022 | ||||
Dates: |
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Institution: | University of Warwick | ||||
Theses Department: | Department of Psychology | ||||
Thesis Type: | PhD | ||||
Publication Status: | Unpublished | ||||
Supervisor(s)/Advisor: | Hills, Thomas ; Brown, G. D. A. (Gordon D. A.) | ||||
Sponsors: | Leverhulme Trust | ||||
Format of File: | |||||
Extent: | viii, 247 pages : illustrations | ||||
Language: | eng |
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