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Competition and the Use of Foggy Pricing

Author

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  • Eugenio J. Miravete

Abstract

Firms engage in foggy pricing when the menu of tariff options aims at profiting from consumer mistakes. The analysis of this paper concludes that the transition from monopoly to competition in the early US cellular telephone industry does not generally foster the use of such deceptive strategies. I offer three alternative measures to account for the fogginess of the menu of options offered by cellular carriers. All results are robust to the existence of uncertainty regarding future consumption at the time of choosing a particular tariff option, as well as to consumers' heterogeneity with respect to cellular telephone usage. (JEL D03, L11, L12, L13, L96)

Suggested Citation

  • Eugenio J. Miravete, 2013. "Competition and the Use of Foggy Pricing," American Economic Journal: Microeconomics, American Economic Association, vol. 5(1), pages 194-216, February.
    • Handle: RePEc:aea:aejmic:v:5:y:2013:i:1:p:194-216
    Note: DOI: 10.1257/mic.5.1.194
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    Citations

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    Cited by:

    1. Yiquan Gu & Tobias Wenzel, 2014. "Strategic Obfuscation and Consumer Protection Policy," Journal of Industrial Economics, Wiley Blackwell, vol. 62(4), pages 632-660, December.
    2. Jonathan D. Ketcham & Nicolai V. Kuminoff & Christopher A. Powers, 2016. "Choice Inconsistencies among the Elderly: Evidence from Plan Choice in the Medicare Part D Program: Comment," American Economic Review, American Economic Association, vol. 106(12), pages 3932-3961, December.
    3. Ernst Fehr & Keyu Wu, 2021. "Obfuscation in competitive markets," ECON - Working Papers 391, Department of Economics - University of Zurich, revised Feb 2023.
    4. Byrne, David P. & Martin, Leslie A., 2021. "Consumer search and income inequality," International Journal of Industrial Organization, Elsevier, vol. 79(C).
    5. Mark Armstrong, 2015. "Search and Ripoff Externalities," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 47(3), pages 273-302, November.
    6. Martins, Lurdes & Szrek, Helena, 2019. "The impact of the decision environment on consumer choice of mobile service plans: An experimental examination," Utilities Policy, Elsevier, vol. 56(C), pages 20-32.
    7. Michael Grubb, 2015. "Failing to Choose the Best Price: Theory, Evidence, and Policy," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 47(3), pages 303-340, November.
    8. Yiquan Gu & Tobias Wenzel, 2017. "Consumer confusion, obfuscation and price regulation," Scottish Journal of Political Economy, Scottish Economic Society, vol. 64(2), pages 169-190, May.
    9. Gu, Yiquan & Wenzel, Tobias, 2015. "Putting on a tight leash and levelling playing field: An experiment in strategic obfuscation and consumer protection," International Journal of Industrial Organization, Elsevier, vol. 42(C), pages 120-128.
    10. Nicola Branzoli, 2016. "Price dispersion and consumer inattention: evidence from the market of bank accounts," Temi di discussione (Economic working papers) 1082, Bank of Italy, Economic Research and International Relations Area.
    11. Genakos, Christos & Kretschmer, Tobias & Nicolle, Ambre, 2021. "Strategic confusopoly: evidence from the UK mobile market," LSE Research Online Documents on Economics 113835, London School of Economics and Political Science, LSE Library.

    More about this item

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications

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    1. Competition and the Use of Foggy Pricing (AEJ:MI 2013) in ReplicationWiki

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