Price Uncertainty and Consumer Search: A Structural Model of Consideration Set Formation

Mehta, Nitin; Rajiv, Surendra; Srinivasan, Kannan
January 2003
Marketing Science;Winter2003, Vol. 22 Issue 1, p58
Academic Journal
We offer an econometric framework that models consumer's consideration set formation as an outcome of her costly information search behavior. Because frequently purchased products are characterized by frequent price promotions of varying depths of discounts, a consumer faces significant uncertainty about the prices of the brands. The consumers engage in a fixed-sample search strategy that results in their discovering the posted prices of a subset of the available brands. This subset is referred to as the consumer's 'consideration set.' The proposed model is estimated using the scanner data set for liquid detergents. Our key empirical results are: (i) consumers zincur significant search costs to discover the posted prices of the brands; (ii) whereas in-store displays and feature ads do not influence consumers' quality perceptions of the brands, they significantly reduce search costs for observing the prices of the brands; (iii) per capita income of consumer's household significantly increases her search costs; and (iv) the consumers' price sensitivity is seriously underestimated if we were to assume that consumers get to know all the posted prices at zero cost. The proposed model is also estimated for the ketchup category to enable us to do cross-category comparisons of consumers' price search behavior.


Related Articles

  • Size Does Matter: Analyzing Brand-Size Competition Using Store Level Scanner Data. Kumar, Pankaj; Divakar, Suresh // Journal of Retailing;Spring99, Vol. 75 Issue 1, p4 

    The article presents the abstract of an article related to strategic planning in retail trade, which has been published in the March 1, 1999 issue of the "Journal of Retailing." Everyday retailers have to decide which brands, sizes, and varieties to carry as well as how to coordinate pricing,...

  • Cross-Brand Pass-Through in Supermarket Pricing. Dub�, Jean-Pierre; Gupta, Sachin // Marketing Science;May/Jun2008, Vol. 27 Issue 3, p324 

    We investigate the sensitivity of cross-brand pass-through estimates to two types of pooling: across stores, and across regular price and promotional price weeks. Using the category data from Besanko, Dub�, and Gupta (2005), hereafter BDG, we find consistent support across all 11 categories...

  • Letting things slide.  // Packaging Magazine;11/20/2003, Vol. 6 Issue 21, p7 

    Focuses on strategies to help promote brand. Importance of innovations to increase customer awareness of the product; Emphasis on choosing the right packaging for food products; Research for customer preferences. INSET: Expanding production.

  • Letters: Segmentation will alienate individuals. Capel, Neil; Atkinson, David; White, Simon // Marketing Week (Online Edition);4/23/2014, p20 

    Several letters to the editor are presented in response to articles in previous issues, including "UK Consumers Underwhelmed by Their Experience With Brands," another about a study showing that music brings generations together, and another about price promotions by retailer Debenhams.

  • Charity cases. Castle, Jemma // Choice;Aug2014, p30 

    The article investigates the impact of cause-related marketing on consumers' perception of a brand as compared to other marketing strategies like sales promotions and sponsorship. It discusses the potential of cause-related marketing to generate funds for a charity and explains how the...

  • JML roadshow to run in DIY stores.  // Marketing (00253650);5/16/2007, p10 

    The article reports that JML brand by Homewares is to carry out an experiential campaign in British stores in the summer of 2007. The campaign will show a range of the brand's gadgets demonstrated by a dedicated team, which will visit a different store with a camera crew to record consumers'...

  • TARGETING CONSUMERS. Nanayakkara, Naomi // Brand Strategy;Oct2004, Issue 186, p46 

    This article presents marketing strategies to target consumers. Consumers are less concerned with information overload than advertisers believe. Bombarding consumers daily with product, service, corporate and brand information is not a widespread nuisance. While 38% of British population claim...

  • An Examination of Selected Marketing Mix Elements and Brand Equity. Yoo, Boonghee; Donthu, Naveen; Lee, Sungho // Journal of the Academy of Marketing Science;Spring2000, Vol. 28 Issue 2, p195 

    This study explores the relationships between selected marketing mix elements and the creation of brand equity. The authors propose a conceptual framework in which marketing elements are related to the dimensions of brand equity, that is, perceived quality, brand loyalty, and brand associations...

  • How pricing can keep customers with your brand. Mazur, Laura // Marketing (00253650);12/12/2002, p18 

    Examines how pricing can help in keeping customers with your brand. Effect of lowering of prices on shoppers; Significance of pricing in marketing strategy; Reasons why companies should consider pricing and the psychology of consumption.


Read the Article


Sign out of this library

Other Topics