Faculty Publications

Title

Estimating the efficiency of consumer choices of new automobiles

Document Type

Article

Journal/Book/Conference Title

Journal of Economic Psychology

Volume

13

Issue

3

First Page

375

Last Page

397

Abstract

The available literature indicates that consumers are likely to be less than perfectly informed when confronted with a choice situation. But whether the costs to consumers of imperfect information are large enough to warrant public intervention in markets is still an open question. By studying the optimality of new car choices, we attempt to shed light on this question in this study. We use individual-level preference data to rank the alternatives in each respondent's choice set on the basis of quality. Defining a non-optimal choice as one in which the consumer could have purchased a brand of higher estimated quality for a lower price than the actual choice, we estimate the cost savings that would have resulted from buying the higher quality brand at the lower price. We go on to relate these estimated losses due to non-optimal choices to brands purchased and to consumer characteristics. © 1992.

Original Publication Date

1-1-1992

DOI of published version

10.1016/0167-4870(92)90001-N

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