Modeling Consideration Set Substitution
Working Paper (Revising for invited resubmission with Marketing Science)
Consumers purchasing from a large set of alternatives often evaluate only a subset-a consideration set-in order to balance the expected benefits from search (e.g., finding a high-quality product) with costs (time, etc., needed to make a choice). If the marginal expected benefit from search decreases in the number of considered alternatives, marketing actions that encourage consideration of one alternative may discourage consideration of another.
This paper documents the importance of accounting for this “consideration set substitution,” and extends the random utility framework underlying commonly used consideration set formation models in order to account for it.