The Informative Role of Advertising and Experience in Dynamic Brand Choice: an Application to the Ready-to-Eat Cereal Market
Yan Chen and Ginger Jin
,
Chapter 5 in Value of Information: Methodology Frontiers and New Applications in Environment and Health
July
2012
Abstract
We study how consumers make brand choices when they have limited information. In a market of experience goods with frequent product entry and exit, consumers face two types of information problems: first, they have limited information about a product’s existence; second, even if they know a product exists, they do not have full information about its quality until they purchase and consume it. In this chapter, we incorporate purchase experience and brand advertising as two sources of information and examine how consumers use them in a dynamic process.