Expanding product space and the formation of preferential decision rules: An evolutionary process of products and consumer preferences

Faced with an expanding product space driven by production innovation, consumers have to reconstruct their preferences toward products in order to make a desirable choice. We assume the pre-choice preferences including decision are adaptively formed based on the experienced post-choice preferences. The repeated choice experiment of hypothetical digital cameras shows that the expansion of a product space could produce a path-dependent effect on the formation of a two-phased preference combining non-compensative and compensative rules. That is, as a perceptual bias, which attribute had expanded would affect which attribute would be incorporated into non-compensative rules. In formulating marketing strategies for innovative products, therefore, marketers should consider the possibility that product innovation might change consumer preferences.