Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/83766
Authors: 
Kaiser, Karen
Schwabe, Rainer
Year of Publication: 
2011
Series/Report no.: 
Working Papers, Banco de México 2011-13
Abstract: 
We consider a decision maker who enjoys choosing from a varied set of alternatives. Building on behavioral evidence, we propose testable axioms which characterize preference for variety, and provide a representation theorem. We go on to illustrate the potential effects of preference for variety in a model of retailing. Consumer welfare may be decreasing in the competitiveness of the retailing sector as competition eliminates the scope for retailers to offer variety. Mainstream consumers with a preference for variety and consumers with eccentric tastes enjoy a symbiotic relationship. Competition over mainstream consumers makes retailers offer more exotic goods, while eccentric consumers subsidize their carrying costs.
Subjects: 
preferences
variety
representation theorem
retail
competition
JEL: 
D0
D03
D4
Document Type: 
Working Paper
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