Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/150079
Authors: 
Spiegler, Ran
Year of Publication: 
2006
Citation: 
[Journal:] Theoretical Economics [ISSN:] 1555-7561 [Volume:] 1 [Year:] 2006 [Issue:] 2 [Pages:] 207-231
Abstract: 
I study a market model in which profit-maximizing firms compete in multi-dimensional pricing strategies over a consumer, who is limited in his ability to grasp such complicated objects and therefore uses a sampling procedure to evaluate them. Firms respond to increased competition with an increased effort to obfuscate, rather than with more competitive pricing. As a result, consumer welfare is not enhanced and may even deteriorate. Specifically, when firms control both the price and the quality of each dimension, and there are diminishing returns to quality, increased competition implies an efficiency loss which is entirely borne by consumers.
Subjects: 
Bounded rationality
industrial organization
multi-dimensional pricing
law of small numbers
market exploitation
obfuscation
JEL: 
C79
D49
D83
Creative Commons License: 
https://creativecommons.org/licenses/by-nc/2.5
Document Type: 
Article

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