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Shrouded Attributes and Information Suppression: Evidence from Field Experiments

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  • Hossain, Tanjim
  • Morgan, John

Abstract

The recent theoretical literature suggests that consumer myopia may lead firms to profitably suppress or shroud some attributes of the price. Empirical and experimental data also suggest that sellers gain by transferring a larger fraction of the price to the shrouded attributes. However, alternative theories, including mental accounting, could also explain these framing effects. Using field experiments, we show that the impact of this price framing on revenue vanishes when we explicitly reveal the prices of different attributes, while the framing effect persists only when we shroud some price attributes. Then, using data from a natural experiment that occurred on eBay, we find that when the price of a secondary attribute such as the shipping fee is prominently displayed, the framing effect also disappears. Moreover, average revenues for sellers seem to have increased after this institutional change.

Suggested Citation

  • Hossain, Tanjim & Morgan, John, 2006. "Shrouded Attributes and Information Suppression: Evidence from Field Experiments," Competition Policy Center, Working Paper Series qt9d72t101, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
  • Handle: RePEc:cdl:compol:qt9d72t101
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    References listed on IDEAS

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    1. 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.
    2. Hossain Tanjim & Morgan John, 2006. "...Plus Shipping and Handling: Revenue (Non) Equivalence in Field Experiments on eBay," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 5(2), pages 1-30, January.
    3. Miao, Chun-Hui, 2010. "Consumer myopia, standardization and aftermarket monopolization," European Economic Review, Elsevier, vol. 54(7), pages 931-946, October.
    4. Richard H. Thaler, 2008. "Mental Accounting and Consumer Choice," Marketing Science, INFORMS, vol. 27(1), pages 15-25, 01-02.
    5. Michael D. Smith & Erik Brynjolfsson, 2001. "Consumer Decision-making at an Internet Shopbot: Brand Still Matters," NBER Chapters,in: E-commerce, pages 541-558 National Bureau of Economic Research, Inc.
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    Cited by:

    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.
    3. Schmöller, Arno, 2010. "Bidding Behavior, Seller Strategies, and the Utilization of Information in Auctions for Complex Goods," Munich Dissertations in Economics 11175, University of Munich, Department of Economics.

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