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Strategic obfuscation and consumer protection policy in financial markets: Theory and experimental evidence

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  • Gu, Yiquan
  • Wenzel, Tobias

Abstract

This paper studies obfuscation decisions by firms in retail financial markets theoretically and experimentally. We show that more prominent firms are more likely to obfuscate. While prominent firms always choose maximum obfuscation, the obfuscation by less prominent firms depends on the degree of asymmetry in prominence and consumer protection policy. We evaluate the impact of a consumer protection policy that limits the scope of obfuscation. We show that such a policy may not be effective as less prominent firms may increase their obfuscation practice.

Suggested Citation

  • Gu, Yiquan & Wenzel, Tobias, 2012. "Strategic obfuscation and consumer protection policy in financial markets: Theory and experimental evidence," DICE Discussion Papers 76, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
  • Handle: RePEc:zbw:dicedp:76
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    References listed on IDEAS

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    More about this item

    Keywords

    Obfuscation; Financial markets; Consumer protection; Experiment;

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D18 - Microeconomics - - Household Behavior - - - Consumer Protection
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior

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