Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/149255
Authors: 
Herweg, Fabian
Müller, Daniel
Weinschenk, Philipp
Year of Publication: 
2016
Series/Report no.: 
CESifo Working Paper 6168
Abstract: 
We consider a brand manufacturer who can offer, next to its high-quality product, also a decoy good and faces competition by a competitive fringe that produces low quality. We show that the brand manufacturer optimally provides a decoy good to boost the demand for its main product if consumers’ purchasing decisions are distorted by salient thinking. The optimal decoy good is designed such that the superior quality of the brand manufacturers’ main product and the unattractive feature of the fringe product are salient.
Subjects: 
competition
decoy good
salience
JEL: 
L13
L15
D03
D21
Document Type: 
Working Paper

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