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Are brand preferences inherent, constructed, or a mixture of both? A memory-based dual-process model

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Abstract

Understanding whether consumer preferences are inherent or constructed has profound implications for a range of marketing and economic issues, such as demand estimation, consumer education and information, market design and competition. The literature reveals a formidable divide between inherent versus constructed preferences, underscoring a long-standing debate regarding the nature of consumer preferences. In this research, we develop a dual-process structural learning model rooted in cognitive theories, enabling empirical estimation of the extent to which preferences are inherent versus constructed. Our results show that brand preferences are largely constructed, with 76% of brand evaluations across all studied brands being formed at the time of purchase. This finding helps to reconcile the enduring divide that has shaped the field’s evolution. In addition, our analysis reveals that the mode of evaluation significantly influences market competitive dynamics, with 60% of brand-switching resulted from constructed preferences. Furthermore, we also find mode of evaluation has asymmetric impacts on established versus new brands. These findings open up novel avenues for shaping competitive landscapes by strategically altering (e.g., through nudges) consumer’s mode of evaluation, becoming extremely relevant in the digital economy characterized by overwhelming and rapid information exchange.

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Notes

  1. We refer to the representative consumer as a female for ease of writing, but any observation is generalizable to the male consumer as well.

  2. Completeness means that there should be a complete order relation between the options that enables the consumer to determine the optimal option in the light of available choice alternatives. Consistency of preferences means that the order relation of preferences is context invariant, i.e., preferences should not change with the way choice options are described, or with the way the evaluation or judgment is elicited.

  3. Equation (3) can be written as Eq. (4) if we follow the law of motion and recursively replace the posterior as the function of its prior and the newly received signal.

  4. We will be referring to the econometrician as a male to differentiate him from the consumer.

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Zhiying, J., Thomas, S.A. & Junhong, C. Are brand preferences inherent, constructed, or a mixture of both? A memory-based dual-process model. Rev Manag Sci (2024). https://doi.org/10.1007/s11846-024-00765-x

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