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Every shroud has a silver lining: The visible benefits of hidden surcharges

Author

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  • de Meza, David
  • Reyniers, Diane

Abstract

Opportunities for shrouded pricing drive down upfront price as firms compete to capture new customers. Unless the surcharge is sufficiently high, consumers are worse off if the practice is banned, assuming Cournot–Nash equilibrium and isoelastic demand.

Suggested Citation

  • de Meza, David & Reyniers, Diane, 2012. "Every shroud has a silver lining: The visible benefits of hidden surcharges," Economics Letters, Elsevier, vol. 116(2), pages 151-153.
  • Handle: RePEc:eee:ecolet:v:116:y:2012:i:2:p:151-153
    DOI: 10.1016/j.econlet.2012.02.027
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    References listed on IDEAS

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    1. repec:elg:eechap:16609_3 is not listed on IDEAS
    2. Xavier Gabaix & David Laibson, 2018. "Shrouded attributes, consumer myopia and information suppression in competitive markets," Chapters,in: Handbook of Behavioral Industrial Organization, chapter 3, pages 40-74 Edward Elgar Publishing.
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    Cited by:

    1. repec:oup:revfin:v:21:y:2017:i:3:p:1189-1216. is not listed on IDEAS
    2. Klophaus, Richard, 2014. "Should jet fuel surcharges be regulated, and if so, how?," Research in Transportation Economics, Elsevier, vol. 45(C), pages 18-23.
    3. Zenger, Hans, 2013. "Why firms’ exploitation of consumer myopia may benefit myopic consumers," Economics Letters, Elsevier, vol. 118(2), pages 307-309.
    4. Michael Kosfeld & Ulrich Schüwer, 2017. "Add-on Pricing in Retail Financial Markets and the Fallacies of Consumer Education," Review of Finance, European Finance Association, vol. 21(3), pages 1189-1216.

    More about this item

    Keywords

    Shrouded prices; Waterbedding; Consumer protection;

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • D60 - Microeconomics - - Welfare Economics - - - General

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