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Consumer myopia, competition and the incentives to unshroud add-on information

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  • Wenzel, Tobias

Abstract

This paper studies unshrouding decisions in a framework similar to Gabaix and Laibson (2006), but considers an alternative unshrouding mechanism where the impact of advertising add-on information depends on the number of unshrouding firms. We show that shrouding becomes less prevalent as the number of competing firms increases. With unshrouding costs a non-monotonic relationship between the number of firms and unshrouding may arise.

Suggested Citation

  • Wenzel, Tobias, 2014. "Consumer myopia, competition and the incentives to unshroud add-on information," Journal of Economic Behavior & Organization, Elsevier, vol. 98(C), pages 89-96.
  • Handle: RePEc:eee:jeborg:v:98:y:2014:i:c:p:89-96
    DOI: 10.1016/j.jebo.2013.12.002
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    References listed on IDEAS

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    1. Xavier Gabaix & David Laibson, 2006. "Shrouded Attributes, Consumer Myopia, and Information Suppression in Competitive Markets," The Quarterly Journal of Economics, Oxford University Press, vol. 121(2), pages 505-540.
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    12. Kosfeld, Michael & Schüwer, Ulrich, 2011. "Add-on Pricing, Naive Consumers, and the Hidden Welfare Costs of Education," CEPR Discussion Papers 8636, C.E.P.R. Discussion Papers.
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    Citations

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    Cited by:

    1. Flores-Fillol, Ricardo & Iozzi, Alberto & Valletti, Tommaso, 2014. "Platform pricing and consumer foresight: The case of airports," Working Papers 2072/242278, Universitat Rovira i Virgili, Department of Economics.
    2. Wenzel, Tobias & Normann, Hans-Theo, 2015. "Shrouding add-on information: an experimental study," Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 113149, Verein für Socialpolitik / German Economic Association.
    3. repec:kap:jincot:v:17:y:2017:i:3:d:10.1007_s10842-016-0238-8 is not listed on IDEAS
    4. Wenzel, Tobias, 2015. "Partial shrouding in asymmetric markets," Economics Letters, Elsevier, vol. 136(C), pages 223-226.
    5. M. Savioli & L. Zirulia, 2015. "Add-on pricing: theory and evidence from the cruise industry," Working Papers wp1026, Dipartimento Scienze Economiche, Universita' di Bologna.

    More about this item

    Keywords

    Bounded rationality; Add-on pricing; Shrouding;

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General

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