Business Intelligence

Consideration Sets And Competitive Marketing

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Executive Summary

The authors study a market model in which competing firms use costly marketing devices to influence the set of alternatives which consumers perceive as relevant. Consumers in the model are boundedly rational in the sense that they have an imperfect perception of what is relevant to their decision problem. They apply well-defined preferences to a "Consideration set", which is a function of the marketing devices employed by the firms. They examine the implications of this behavioral model in the context of a competitive market model, particularly on industry profits, vertical product differentiation, the use of marketing devices and consumers' conversion rates.

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