Why Not Sell Lottery Tickets in a Pharmacy: On Conflicting Product Features and Consumer Choice

Abstract

Abstracting from decision costs and potential self-control problems, additional choice options commonly are believed to make the decision maker better off. However, according to the questionnaire data reported in this paper, there is at least one more exception to this basic tenet of economics to be considered. In particular, if in a consumer choice problem the additional choice options exhibit features that conflict with those of the old ones, e.g. lottery tickets (gambling) and health care products (health, reliability), this is found to cause disutility which people prefer to avoid. Assuming local distance to alleviate the negative effect, it is shown how our findings lead to increased local concentration in a standard model of spatial competition if different products are considered. Further applications, e.g. in terms of product line extensions, are discussed.

Keywords: Consumer Choice, Marketing, Spatial Competition, Utility

JEL Classification: D11, D12, L11, M31