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Search and Ripoff Externalities

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  • Mark Armstrong

Abstract

This paper surveys models of markets in which some consumers are "savvy" while others are not. We discuss when the presence of savvy consumers improves the deals available to non-savvy consumers in the market (the case of search externalities), and when the non-savvy fund generous deals for savvy consumers (ripoff externalities). We also discuss when the two groups of consumers have aligned or divergent views about market interventions. The analysis covers two overlapping families of models: those which examine markets with price/quality dispersion, and those which exhibit forms of consumer hold-up.

Suggested Citation

  • Mark Armstrong, 2014. "Search and Ripoff Externalities," Economics Series Working Papers 715, University of Oxford, Department of Economics.
  • Handle: RePEc:oxf:wpaper:715
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    File URL: http://www.economics.ox.ac.uk/materials/papers/13378/paper715.pdf
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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. Michael Grubb & Victor Tremblay, 2015. "Introduction: Behavioral Industrial Organization," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 47(3), pages 243-245, November.
    3. Foucart, Renaud, 2017. "Meta-Search and Market Concentration," Rationality and Competition Discussion Paper Series 15, CRC TRR 190 Rationality and Competition.
    4. Christian Schultz, 2017. "Collusion in Markets with Imperfect Price Information on Both Sides," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 50(3), pages 287-301, May.
    5. Michael Grubb, 2015. "Failing to Choose the Best Price: Theory, Evidence, and Policy," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 47(3), pages 303-340, November.
    6. repec:eee:gamebe:v:110:y:2018:i:c:p:194-215 is not listed on IDEAS
    7. Fabra, Natalia & Montero, Juan Pablo, 2017. "Product Choice and Price Discrimination in Markets with Search Costs," CEPR Discussion Papers 12046, C.E.P.R. Discussion Papers.
    8. 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.
    9. repec:eee:jhecon:v:57:y:2018:i:c:p:131-146 is not listed on IDEAS

    More about this item

    Keywords

    Consumer protection; consumer search; price dispersion; hold-up; add-on pricing;

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D18 - Microeconomics - - Household Behavior - - - Consumer Protection
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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