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Price competition and limited attention

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  • Karpov, Aleksandr

Abstract

The paper develops a model of price competition in presence of consumers with limited attention. Education and obfuscation marketing strategies are studied. It is shown that firms in highly competitive industries have incentives to obfuscate, but firms in low competitive industries have not.

Suggested Citation

  • Karpov, Aleksandr, 2017. "Price competition and limited attention," Economics Discussion Papers 2017-89, Kiel Institute for the World Economy (IfW Kiel).
    • Handle: RePEc:zbw:ifwedp:201789
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    References listed on IDEAS

    as
    1. Ran Spiegler, 2016. "Choice Complexity and Market Competition," Annual Review of Economics, Annual Reviews, vol. 8(1), pages 1-25, October.
    2. Paola Manzini & Marco Mariotti, 2014. "Stochastic Choice and Consideration Sets," Econometrica, Econometric Society, vol. 82(3), pages 1153-1176, May.
    3. Kfir Eliaz & Ran Spiegler, 2011. "Consideration Sets and Competitive Marketing," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 78(1), pages 235-262.
    4. Paul Heidhues & Botond Kőszegi, 2017. "Naïveté-Based Discrimination," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 132(2), pages 1019-1054.
    5. Michael Grubb, 2015. "Failing to Choose the Best Price: Theory, Evidence, and Policy," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 47(3), pages 303-340, November.
    6. Blundell,Richard & Newey,Whitney K. & Persson,Torsten (ed.), 2006. "Advances in Economics and Econometrics," Cambridge Books, Cambridge University Press, number 9780521871525.
    7. 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.
    8. Michele Piccione & Ran Spiegler, 2012. "Price Competition Under Limited Comparability," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 127(1), pages 97-135.
    9. Ran Spiegler, 2014. "Competitive Framing," American Economic Journal: Microeconomics, American Economic Association, vol. 6(3), pages 35-58, August.
    10. Ran Spiegler, 2019. "Behavioral Economics and the Atheoretical Style," American Economic Journal: Microeconomics, American Economic Association, vol. 11(2), pages 173-194, May.
    11. Yiquan Gu & Tobias Wenzel, 2014. "Strategic Obfuscation and Consumer Protection Policy," Journal of Industrial Economics, Wiley Blackwell, vol. 62(4), pages 632-660, December.
    12. Yusufcan Masatlioglu & Daisuke Nakajima & Erkut Y. Ozbay, 2012. "Revealed Attention," American Economic Review, American Economic Association, vol. 102(5), pages 2183-2205, August.
    13. Gerasimou, Georgios & Papi, Mauro, 2015. "Oligopolistic Competition with Choice-Overloaded Consumers," MPRA Paper 68509, University Library of Munich, Germany.
    14. Kfir Eliaz & Ran Spiegler, 2015. "Beyond “Ellison’s Matrix”: New Directions in Behavioral Industrial Organization," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 47(3), pages 259-272, November.
    15. Charlene Cosandier & Filomena Garcia & Malgorzata Knauff, 2018. "Price competition with differentiated goods and incomplete product awareness," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 66(3), pages 681-705, October.
    16. , & ,, 2011. "On the strategic use of attention grabbers," Theoretical Economics, Econometric Society, vol. 6(1), January.
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    18. Danilov, V., 2015. "Beyond Classical Rationality: Two-Stage Rationalization," Journal of the New Economic Association, New Economic Association, vol. 26(2), pages 12-35.
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    More about this item

    Keywords

    bounded rationality; hotelling linear city model; consideration set; limited attention; unawareness;
    All these keywords.

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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