Consumer protection and the incentive to become informed
AbstractWe discuss the impact of consumer protection policies on consumer incentives to become informed of the best deals available in the market. In a market with costly consumer search, we find that imposing a cap on suppliers' prices reduces the incentive to engage in search, 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.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 9898.
Date of creation: Aug 2008
Date of revision:
Consumer protection; search; price caps; advertising;
Other versions of this item:
- Mark Armstrong & John Vickers & Jidong Zhou, 2009. "Consumer Protection and the Incentive to Become Informed," Journal of the European Economic Association, MIT Press, vol. 7(2-3), pages 399-410, 04-05.
- D18 - Microeconomics - - Household Behavior - - - Consumer Protection
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-08-14 (All new papers)
- NEP-COM-2008-08-14 (Industrial Competition)
- NEP-LAB-2008-08-14 (Labour Economics)
- NEP-MIC-2008-08-14 (Microeconomics)
- NEP-MKT-2008-08-14 (Marketing)
- NEP-REG-2008-08-14 (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.:
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