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Search and Ripoff Externalities

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  • Armstrong, Mark

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

  • Armstrong, Mark, 2014. "Search and Ripoff Externalities," MPRA Paper 57958, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:57958
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    References listed on IDEAS

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    More about this item

    Keywords

    Consumer protection; consumer search; price dispersion; hold-up; add-on pricing.;
    All these keywords.

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D18 - Microeconomics - - Household Behavior - - - Consumer Protection
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • M3 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising

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