We discuss the impact of consumer protection policies on consumers' incentives to become informed of the best deals available in the market. In a market with costly information acquisition, we find that imposing a cap on suppliers' prices reduces the incentive to become informed of market conditions, with the result that prices paid by consumers (both informed and uninformed) may rise. In a related model where consumers have the ability to refuse to receive marketing, we find that this ability softens price competition and can make all consumers worse off. (JEL: D18, D83, L51) (c) 2009 by the European Economic Association.
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Volume (Year): 7 (2009) Issue (Month): 2-3 (04-05) Pages: 399-410 Download reference. The following formats are available: HTML
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Find related papers by JEL classification: D18 - Microeconomics - - Household Behavior - - - Consumer Protection D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
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