Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/108534
Authors: 
Crosetto, Paolo
Gaudeul, Alexia
Year of Publication: 
2014
Series/Report no.: 
Jena Economic Research Papers 2014-026
Abstract: 
We run a market experiment where firms can choose not only their price but also whether to present comparable offers. They are faced with artificial demand from consumers who make mistakes when assessing the net value of products on the market. If some offers are comparable however, some consumers favor the best of the comparable offers vs. non-comparable offers. We vary the number of such consumers as well as the strength of their preferences for the best of the comparable offers. In treatments where firms observe the past decisions of their competitors, firms learn not to present comparable offers especially when many consumers prefer comparable offers. This occurs after initial periods with strong competition and leads to lower welfare for all consumers. In treatments where firms cannot monitor the competition, firms end up having to present comparable offers, which leads to an improvement in welfare for all consumers.
Subjects: 
asymmetric dominance
attraction effect
collusion
competition
confusopoly
experiment
framing
industrial organization
obfuscation
oligopoly
price comparison
shrouding
spurious complexity
standardization
transparency
JEL: 
C92
D18
D43
L13
L15
Document Type: 
Working Paper

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