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Shrouded Attributes and Information Suppression: Evidence from Field Experiments

  • Hossain, Tanjim
  • Morgan, John

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.

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Paper provided by Competition Policy Center, Institute for Business and Economic Research, UC Berkeley in its series Competition Policy Center, Working Paper Series with number qt9d72t101.

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Date of creation: 01 Sep 2006
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Handle: RePEc:cdl:compol:qt9d72t101
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  1. 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.
  2. Miao, Chun-Hui, 2010. "Consumer myopia, standardization and aftermarket monopolization," European Economic Review, Elsevier, vol. 54(7), pages 931-946, October.
  3. 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.
  4. Xavier Gabaix & David Laibson, 2005. "Shrouded Attributes, Consumer Myopia, and Information Suppression in Competitive Markets," NBER Working Papers 11755, National Bureau of Economic Research, Inc.
  5. Richard Thaler, 1985. "Mental Accounting and Consumer Choice," Marketing Science, INFORMS, vol. 4(3), pages 199-214.
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