Publisher's Synopsis
Excerpt from Competitive Advertising and Pricing in Duopolies: The Implications of Relevant Set-Response Analysis
The key question in this section is whether a model of rational utility maximization implies that consumers evaluate only a small number of the available brands. The basic idea is that consumers balance evaluation cost with potential gains from further evaluation. This idea is not new. It is related to search theories in Gould Nelson and Schmalensee It is consistent with the behavioral science observation that consumers use heuristics to eliminate alternatives (tversky and Kahneman 1974. Shugan 1980. And Bettman and it is used prescriptively to select advertising copy (gross Our contribution is to formalize the idea in the context of relevant sets and to compare its predictions to data.
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