Price Competition under Limited Comparability
AbstractThis paper studies market competition when firms can influence consumers' ability to compare market alternatives, through their choice of price "formats". We introduce random graphs as a tool for modelling limited comparability of formats. Our main results concern the interaction between firms' equilibrium price and format decisions and its implications for industry profits and consumer switching rates. We show that narrow regulatory interventions that aim to facilitate comparisons may have adverse consequences for consumer welfare. Finally, we argue that our limited-comparability approach provides a new perspective into the phenomenon of product differentiation.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 21427.
Date of creation: 04 May 2009
Date of revision: 16 Oct 2009
price competition; industrial organization; limited comparability; bounded rationality; framing; consumer protection; product differentiation; complexity;
Other versions of this item:
- D03 - Microeconomics - - General - - - Behavioral Microeconomics; Underlying Principles
- D18 - Microeconomics - - Household Behavior - - - Consumer Protection
- C79 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Other
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-03-28 (All new papers)
- NEP-COM-2010-03-28 (Industrial Competition)
- NEP-MIC-2010-03-28 (Microeconomics)
- NEP-MKT-2010-03-28 (Marketing)
- NEP-REG-2010-03-28 (Regulation)
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