Fading Choice: Transport Costs and Variety in Consumer Goods

Fading Choice: Transport Costs and Variety in Consumer Goods

The lack of market development in remote areas is usually measured by the prices for a given set of consumer goods. We focus instead on the way distance constrains the variety in choices facing consumers. We construct a model of monopolistic competition between traders. An increase in transport costs reduces consumer welfare not only through lower incomes and higher prices but also through redu...

Consumer Choice Between Hedonic and Utilitarian Goods

In this article, the authors examine how consumer choice between hedonic and utilitarian goods is influenced by the nature of the decision task. Building on research on elaboration, the authors propose that the relative salience of hedonic dimensions is greater when consumers decide which of several items to give up (forfeiture choices) than when they decide which item to acquire (acquisition c...

Transport costs , intermediate goods , and localized growth

This paper constructs a dynamic two-regional general equilibrium model, in which the interregional production and trade patterns are endogenously determined. By embedding an endogenous growth mechanism in this approach, it becomes possible to show why and how localized growth with different regional growth rates may emerge without any locational limitations of technological spillovers and despi...

The Costs and Benefits of Temptation in Consumer Choice

Relative thinking in consumer choice between differentiated goods and services and its implications for business strategy

The article shows that when people consider differentiated goods or services that differ in price and quality, they exhibit a decision-making bias of “relative thinking”: relative price differences affect them even when economic theory suggests that only absolute price differences matter. This result is obtained in four different consumption categories. Sometimes subjects are affected only by r...