NDLI: Learning About Computers: An Analysis of Information Search and Technology Choice

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Learning About Computers: An Analysis of Information Search and Technology Choice

Content Provider	Springer Nature Link
Author	Erdem, Tülin Keane, Michael P. Öncü, T. Sabri Strebel, Judi
Copyright Year	2005
Abstract	We estimate a dynamic model of how consumers learn about and choose between different brands of personal computers (PCs). To estimate the model, we use a panel data set that contains the search and purchase behavior of a set of consumers who were in the market for a PC. The data includes the information sources visited each period, search durations, as well as measures of price expectations and stated attitudes toward the alternatives during the search process. Our model extends recent work on estimation of Bayesian learning models of consumer choice behavior in environments characterized by uncertainty by estimating a model of active learning—i.e., a model in which consumers make optimal sequential decisions about how much information to gather prior to making a purchase. Also, following the suggestion of Manski (2003), we use our data on price expectations to model consumers’ price expectation process, and, following the suggestion of McFadden (1989a), we incorporate the stated brand quality information into our likelihood function, rather than modeling only revealed preference data.Our analysis sheds light on how consumer forward-looking price expectations and the process of learning about quality influence the consumer choice process. A key finding is that estimates of dynamic price elasticities of demand exceed estimates that ignore the expectations effect by roughly 50%. This occurs because our estimated expectations formation process implies that consumers expect mean reversion in price changes. This enhances the impact of a temporary price cut. Finally, while our work focuses specifically on the PC market, the modeling approach we develop here may be useful for studying a wide range of high-tech, high-involvement durable goods markets where active learning is important.
Starting Page	207
Ending Page	247
Page Count	41
File Format	PDF
ISSN	15707156
Journal	Quantitative Marketing and Economics
Volume Number	3
Issue Number	3
e-ISSN	1573711X
Language	English
Publisher	Kluwer Academic Publishers
Publisher Date	2005-01-01
Publisher Place	Boston
Access Restriction	One Nation One Subscription (ONOS)
Subject Keyword	brand choice models technology choice decision-making under uncertainty information search consumer expectations dynamic programming Statistics for Business/Economics/Mathematical Finance/Insurance Economic Theory Marketing
Content Type	Text
Resource Type	Article
Subject	Economics, Econometrics and Finance Marketing

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