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http://hdl.handle.net/10419/32620
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| Title: | | Spurious complexity and common standards in markets for consumer goods  |
| Authors: | | Gaudeul, Alexia Sugden, Robert |
| Issue Date: | | 2009 |
| Series/Report no.: | | Jena economic research papers 2009,084 |
| Abstract: | | It has been argued that cognitively constrained consumers respond sub-optimally to complex decision problems, and that firms can exploit these limitations by introducing spurious complexity into tariff structures, weakening price competition. We model a countervailing force. Restricting one's choices to the most easily comparable options is a psychologically well-attested heuristic. Consumers who use this heuristic favour firms that follow common conventions about tariff structures. Because a 'common standard' promotes price competition, a firm's use of it signals that it offers value for money, validating the heuristic. This allows an equilibrium in which firms use common standards and set competitive prices. |
| Subjects: | | common standard spurious complexity cognitive limitations |
| JEL: | | D83 L13 L51 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Jena Economic Research Papers, MPI für Ökonomik
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