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.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
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)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Chris M. Wilson, 2008.
"Ordered Search and Equilibrium Obfuscation,"
Economics Series Working Papers
401, University of Oxford, Department of Economics.
- Michele Piccione & Ariel Rubinstein, 2003.
"Modeling the Economic Interaction of Agents With Diverse Abilities to Recognize Equilibrium Patterns,"
Journal of the European Economic Association,
MIT Press, vol. 1(1), pages 212-223, 03.
- Michele Piccione & Ariel Rubinstein, 2002. "Modelling the Economic Interaction of Agents with Diverse Abilities to Recognise Equilibrium Patterns," STICERD - Theoretical Economics Paper Series 440, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
- Michele Piccione & Ariel Rubinstein, 2010. "Modeling the Economic Interaction of Agents with Diverse Abilities to Recognize Equilibrium Patterns," Levine's Working Paper Archive 506439000000000108, David K. Levine.
- Eliaz, Kfir & Spiegler, Ran, 2006.
"Consideration Sets and Competitive Marketing,"
21434, University Library of Munich, Germany, revised 03 Sep 2009.
- Rani Spiegler, 2005.
"The Market for Quacks,"
784828000000000634, UCLA Department of Economics.
- Xavier Gabaix & David Laibson, 2005.
"Shrouded Attributes, Consumer Myopia, and Information Suppression in Competitive Markets,"
NBER Working Papers
11755, National Bureau of Economic Research, Inc.
- Xavier Gabaix & David Laibson, 2006. "Shrouded Attributes, Consumer Myopia, and Information Suppression in Competitive Markets," The Quarterly Journal of Economics, MIT Press, vol. 121(2), pages 505-540, May.
- Gabaix, Xavier & Laibson, David I., 2006. "Shrouded Attributes, Consumer Myopia, and Information Suppression in Competitive Markets," Scholarly Articles 4554333, Harvard University Department of Economics.
- Glenn Ellison & Alexander Wolitzky, 2009. "A Search Cost Model of Obfuscation," NBER Working Papers 15237, National Bureau of Economic Research, Inc.
- Rubenstein, A., 1991.
"On Price Recognition and Computational Complexity in a Monopolistic Model,"
35-91, Tel Aviv.
- Rubinstein, Ariel, 1993. "On Price Recognition and Computational Complexity in a Monopolistic Model," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 473-84, June.
- Spiegler, Ran, 2006.
"Competition over agents with boundedly rational expectations,"
Econometric Society, vol. 1(2), pages 207-231, June.
- Ran Spiegler, 2005. "Competition over Agents with Boundedly Rational Expectations," Levine's Bibliography 122247000000000535, UCLA Department of Economics.
- Varian, Hal R, 1980. "A Model of Sales," American Economic Review, American Economic Association, vol. 70(4), pages 651-59, September.
- Eliaz, Kfir & Spiegler, Ran, 2008. "Consumer optimism and price discrimination," Theoretical Economics, Econometric Society, vol. 3(4), December.
- Crosetto, Paolo & Gaudeul, Alexia, 2012.
"Do consumers prefer offers that are easy to compare? An experimental investigation,"
41462, University Library of Munich, Germany.
- Paolo Crosetto & Alexia Gaudeul, 2011. "Do consumers prefer offers that are easy to compare? An experimental investigation," Jena Economic Research Papers 2011-044, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
- Crosetto, Paolo & Gaudeul, Alexia, 2012. "Do consumers prefer offers that are easy to compare? An experimental investigation," MPRA Paper 36526, University Library of Munich, Germany.
- Wenzel, Tobias, 2013. "Consumer myopia, competition and the incentives to unshroud add-on information," DICE Discussion Papers 126, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht).
If references are entirely missing, you can add them using this form.