Variety Aversion and Information Overload: An Experimental Approach

This paper analyzes the effect of information overload on preference or aversion for variety. According to the model, a rational decision maker who suffers from information overload, faces a two-stage decision process, and is choosing from a set of unknown goods will find it optimal at some point to become variety averse. To test this hypothesis, an experiment is conducted, and its results, that subjects suffering from information overload use variety aversion as a strategy to deal with their cognitive limitations, are consistent with the model. Moreover, results suggest that subjects are, on the average, choosing the optimal number of goods. As the price of the goods increases, subjects become more variety averse. In addition, as they become more experienced, they prefer larger sets of goods.Variety aversion, information overload, bounded rationality, decision making, laboratory experiment.

Limited Attention and Choice

This paper analyzes a boundedly rational decision maker who is uncertain about his preference and faces the following trade-off: adding a good to the choice set has a positive option value but increases the complexity of the choice problem. The increased complexity is modeled as a reduction of the information available for each good. Because of this trade-off there is an optimal number of goods that the decision maker wants to analyze before making his final choice. The choice of the optimal set can be interpreted as the choice among stores. Stores maximize profits and choose a quality, an assortment, and a price. A lower cost of providing quality implies higher price and higher quality. Assortment will be small for very high levels of quality. Better quality of information implies greater variety and higher price. Greater variety combined with good consumer service can be a signal for high quality of the store.Decision making, Bounded rationality, Choice set, Stores, Quality.

Preference for Variety

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.Preferences, variety, representation theorem, retail, competition.

Limited attention and choice

This paper analyzes a boundedly rational decision maker who is uncertain about his preference and faces the following trade-off: adding a good to the choice set has a positive option value but increases the complexity of the choice problem. The increased complexity is modeled as a reduction of the information available for each good. Because of this trade-off there is an optimal number of goods that the decision maker wants to analyze before making his final choice. The choice of the optimal set can be interpreted as the choice among stores. Stores maximize profits and choose a quality, an assortment, and a price. A lower cost of providing quality implies higher price and higher quality. Assortment will be small for very high levels of quality. Better quality of information implies greater variety and higher price. Greater variety combined with good consumer service can be a signal for high quality of the store

Variety aversion and information overload: An experimental approach

This paper analyzes the effect of information overload on preference or aversion for variety. According to the model, a rational decision maker who suffers from information overload, faces a two-stage decision process, and is choosing from a set of unknown goods will find it optimal at some point to become variety averse. To test this hypothesis, an experiment is conducted, and its results, that subjects suffering from information overload use variety aversion as a strategy to deal with their cognitive limitations, are consistent with the model. Moreover, results suggest that subjects are, on the average, choosing the optimal number of goods. As the price of the goods increases, subjects become more variety averse. In addition, as they become more experienced, they prefer larger sets of goods

The vertical structure of upper ocean variability at the Porcupine Abyssal Plain during 2012-2013

This study presents the characterization of variability in temperature, salinity and oxygen concentration, including the vertical structure of the variability, in the upper 1000m of the ocean over a full year in the northeast Atlantic. Continuously profiling ocean gliders with vertical resolution between 0.5-1m provide more information on temporal variability throughout the water column than time series from moorings with sensors at a limited number of fixed depths. The heat, salt and dissolved oxygen content are quantified at each depth. While the near surface heat content is consistent with the net surface heat flux, heat content of the deeper layers is driven by gyre-scale water mass changes. Below ~150m, heat and salt content display intraseasonal variability which has not been resolved by previous studies. A mode-1 baroclinic internal tide is detected as a peak in the power spectra of water mass properties. The depth of minimum variability is at ~415m for both temperature and salinity, but this is a depth of high variability for oxygen concentration. The deep variability is dominated by the intermittent appearance of Mediterranean Water, which shows evidence of filamentation. Susceptibility to salt fingering occurs throughout much of the water column for much of the year. Between about 700-900m, the water column is susceptible to diffusive layering, particularly when Mediterranean Water is present. This unique ability to resolve both high vertical and temporal resolution highlights the importance of intraseasonal variability in upper ocean heat and salt content, variations that may be aliased by traditional observing techniques

Access to credit: Awareness and use of formal and informal credit institutions

In this paper we study the determinants of use of formal and informal credit sources. Given that awareness is a necessary step towards use of credit, in order to control for the possible selection bias we decompose the decision to use credit as a two stage decision process in which first, households form their choice set by deciding which type of institutions they want to consider as possible lenders (awareness), and then choose among them (use). Additionally, we allow for correlation between being aware of a specific source of credit and using it. We find evidence that supports the hypothesis that the formal and informal credit markets in Mexico attend different segments of the population. However, our results also show that informal lending sources' characteristics are valued per-se by consumers in certain situations, such as emergencies

Preference for variety

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

Regulación de comisiones de cajero en un modelo de competencia espacial

Following the Hotelling model of spatial competition used by Massoud and Bernhardt (2002) to analyze competition in ATM fees, in this paper we analyze the effects of banning fees on the usage of ATMs by account holders. We find that the prohibition also reduces the fees charged to non-account holders but increases fixed fees. This latter increase is on average smaller than the decrease of the former two, which leads total consumer welfare to increase. We also find that the prohibition decreases total surplus but that this decrease is absorbed by the banks' profits. The model does not consider the decision of banks to open or closedown ATMs, which we leave for future research

Regulation of ATM fees in a model of spatial competition

Following the Hotelling model of spatial competition used by Massoud and Bernhardt (2002) to analyze competition in ATM fees, in this paper we analyze the effects of banning fees on the usage of ATMs by account holders. We find that the prohibition also reduces the fees charged to non-account holders but increases fixed fees. This latter increase is on average smaller than the decrease of the former two, which leads total consumer welfare to increase. We also find that the prohibition decreases total surplus but that this decrease is absorbed by the banks' profits. The model does not consider the decision of banks to open or close down ATMs, which we leave for future research.Banking competition, ATM fees, bank regulation, retail banking.