Consideration Set Formation and Purchase Behavior

Posted: 2 Oct 2017 Last revised: 12 Oct 2020

See all articles by Diego Aparicio

Diego Aparicio

University of Navarra, IESE Business School

Drazen Prelec

Massachusetts Institute of Technology (MIT) - Sloan School of Management; MIT Department of Economics; MIT Brain and Cognitive Sciences

Weiming Zhu

University of Navarra, IESE Business School

Date Written: October 1, 2020

Abstract

Online platforms have the unique ability of offering virtually unlimited assortments. However, they often assume frictionless conditions in the purchase process which may not always hold in practice. We study the impact of heterogeneous search costs on the formation of consideration sets, and how consumers' purchase behavior responds to changes in the online assortment size. We first build a consider-then-choose framework to study how customers who have different familiarity with the options form their consideration sets and make subsequent purchase decisions. We then leverage a field experiment and detailed clickstream datasets to support our theoretical results. We further conduct counterfactual analyses to emulate customers' decision making process under different assortment reductions.

Keywords: Choice Overload, E-Commerce, Online Controlled Experiments, Retail, Search Costs

JEL Classification: C9, D12, M31

Suggested Citation

Aparicio, Diego and Prelec, Drazen and Zhu, Weiming, Consideration Set Formation and Purchase Behavior (October 1, 2020). Available at SSRN: https://ssrn.com/abstract=3044096 or http://dx.doi.org/10.2139/ssrn.3044096

Diego Aparicio (Contact Author)

University of Navarra, IESE Business School ( email )

Carrer d'Arnus i de Gari, 3-7
Barcelona
Spain

Drazen Prelec

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

E40-161
MIT
Cambridge, MA 02142
United States
617-253-2833 (Phone)

MIT Department of Economics ( email )

Department of Economics
E52-371
Cambridge, MA 02142
United States

MIT Brain and Cognitive Sciences ( email )

43 Vassar Street
Cambridge, MA 02139
United States

Weiming Zhu

University of Navarra, IESE Business School ( email )

Avenida Pearson 21
Barcelona, 08034
Spain

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