Huck, Ste en and Zhou, Jidong - Most traditional analyses of competition focus on the supply side. They study how industries will be organised under different informational and technological assumptions. Consumers feed into these models simply in the form of well-ehaved demand functions. This is different in the literature surveyed here. In these models consumers have a presence and their decision rules are modelled in detail.
Consumers’ behaviour may deviate from the orthodox ideal of perfect rationality in many different ways. Consumers may suffer from cognitive limitations that make the comparison of products and prices harder or they may be prone to a wide range of behavioural biases: They might be overoptimistic about the future or overconfident in their ability to avoid accidents. They might be overly afraid to lose compared to the status quo and sometimes their preferences might change from one day to the next