Consumer Decisions in the Age of the Internet: Filtering Information When Searching for Valuable Goods

Abstract

The Internet allows people to access information about a large number of offers almost at the click of a button. For consumers, this has a number of advantages. However, humans have a limited capacity for processing the available information. Hence, consumers often use simple rules of thumb (heuristics) to process this information. Such heuristics allow consumers to choose a good offer, while keeping the search costs low. One such heuristic is the concept of a shortlist, which is useful when searching for a unique valuable good, e.g., a second-hand car or flat. A consumer can find basic information about an offer from the Internet. This information is used to choose a shortlist of offers to inspect more closely, before a final decision is made. This paper gives an overview of recent research on mathematical models of such search processes. These models can be split into three categories: (a) optimization models considering a single decision maker, (b) game theoretic models, and (c) models of group decision procedures. Directions for future research are also considered.