Resumen de Consumer’s response to price distribution and σ-overload under time allocation

Francisco Álvarez González , José Manuel Rey, Raúl G. Sanchis

• It has been recently suggested that both the number of options considered by consumers and their satisfaction when shopping respond to changes in the mean and spread of market prices. A structured analysis of those responses is provided in this paper. A new adverse effect related with consumer’s welfare is presented here, namely a consumer that searches exhaustively among all market options–called maximizer–experiences welfare loss when the dispersion of prices is too high. In fact, her welfare exhibits an inverted-U shape with respect to the standard deviation σ of prices so that an increase in price spread produces more welfare for small values of σ but it has a negative effect for larger values of σ. This new phenomenon is termed σ-overload. It is also shown that a consumer that is content with shopping from a reduced sample of options–a satisficer–avoids σσ-overload by adapting her search behavior to the increase in spread. A quantitative assessment of consumer’s behavior and welfare with respect to changes in the mean and dispersion of prices under different scenarios is also provided.