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Partial shrouding in asymmetric markets

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  • Wenzel, Tobias

Abstract

This paper studies shrouding of add-on information in a market where firms differ in add-on production costs. We show that partial shrouding equilibria, characterised by a selection result, exist: Firms with high (low) add-on costs shroud (unshroud). Unshrouding firms charge lower base-good prices than shrouding firms.

Suggested Citation

  • Wenzel, Tobias, 2015. "Partial shrouding in asymmetric markets," Economics Letters, Elsevier, vol. 136(C), pages 223-226.
    • Handle: RePEc:eee:ecolet:v:136:y:2015:i:c:p:223-226
    DOI: 10.1016/j.econlet.2015.09.035
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    References listed on IDEAS

    as
    1. Anderson, Simon P & de Palma, Andre, 2001. "Product Diversity in Asymmetric Oligopoly: Is the Quality of Consumer Goods Too Low?," Journal of Industrial Economics, Wiley Blackwell, vol. 49(2), pages 113-135, June.
    2. Xavier Gabaix & David Laibson, 2018. "Shrouded attributes, consumer myopia and information suppression in competitive markets," Chapters, in: Victor J. Tremblay & Elizabeth Schroeder & Carol Horton Tremblay (ed.), Handbook of Behavioral Industrial Organization, chapter 3, pages 40-74, Edward Elgar Publishing.
    3. Simon P. Anderson & André de Palma, 2001. "Product Diversity in Asymmetric Oligopoly: Is the Quality of Consumer Goods too Low?," Journal of Industrial Economics, Wiley Blackwell, vol. 49(2), pages 113-135, June.
    4. repec:oup:restud:v:84:y::i:1:p:323-356. is not listed on IDEAS
    5. Wilson, Chris M., 2010. "Ordered search and equilibrium obfuscation," International Journal of Industrial Organization, Elsevier, vol. 28(5), pages 496-506, September.
    6. Wenzel, Tobias, 2014. "Consumer myopia, competition and the incentives to unshroud add-on information," Journal of Economic Behavior & Organization, Elsevier, vol. 98(C), pages 89-96.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. 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.

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    More about this item

    Keywords

    Add-on pricing; Shrouding; Bounded rationality;
    All these keywords.

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General

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