Consumer Protection and the Incentive to Become Informed
We discuss the impact of consumer protection policies on consumers' incentives to become informed of the best deals available in the market. In a market with costly information acquisition, we find that imposing a cap on suppliers' prices reduces the incentive to become informed of market conditions, 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. (JEL: D18, D83, L51) (c) 2009 by the European Economic Association.
Volume (Year): 7 (2009)
Issue (Month): 2-3 (04-05)
|Contact details of provider:|| Web page: http://www.mitpressjournals.org/jeea|
|Order Information:||Web: http://www.mitpressjournals.org/jeea|
References listed on IDEAS
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.:
- Il-Horn Hann & Kai-Lung Hui & Sang-Yong T. Lee & Ivan P. L. Png, 2008. "Consumer Privacy and Marketing Avoidance: A Static Model," Management Science, INFORMS, vol. 54(6), pages 1094-1103, June.
- Armstrong, Mark, 2008. "Interactions between competition and consumer policy," MPRA Paper 7258, University Library of Munich, Germany.
- Burdett, Kenneth & Judd, Kenneth L, 1983. "Equilibrium Price Dispersion," Econometrica, Econometric Society, vol. 51(4), pages 955-69, July.
- Fershtman, C. & Fishman, A., 1991.
"The "Perverse" Effects of Wage and Price Controls in Search Markets,"
11-91, Tel Aviv.
- Fershtman, Chaim & Fishman, Arthur, 1994. "The 'perverse' effects of wage and price controls in search markets," European Economic Review, Elsevier, vol. 38(5), pages 1099-1112, May.
- Simon P. Anderson & André de Palma, 2007. "Information Congestion: open access in a two-sided market," THEMA Working Papers 2007-10, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
When requesting a correction, please mention this item's handle: RePEc:tpr:jeurec:v:7:y:2009:i:2-3:p:399-410. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Anna Pollock-Nelson)
If references are entirely missing, you can add them using this form.