Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/261266 
Authors: 
Year of Publication: 
2022
Series/Report no.: 
Bank of Canada Staff Working Paper No. 2022-13
Publisher: 
Bank of Canada, Ottawa
Abstract: 
Manufacturers often engage in practices that impede consumer search. Examples include proliferating product varieties, imposing vertical informational restraints, and banning online sales to make it more difficult for consumers to compare prices. This paper models vertical bargaining over wholesale prices and obfuscation levels and finds that obfuscation arises in equilibrium whenever retailers have some bargaining power. Once the bargaining power rests with the manufacturer, the equilibrium involves no obfuscation. The final consumers, however, are worse off compared with settings when retailers have all the bargaining power. We show that in vertical markets, policies that impose caps on obfuscation may induce higher wholesale and retail prices. Instead, we propose caps on wholesale prices as an effective consumer protection policy.
Subjects: 
Economic models
Market structure and pricing
JEL: 
C70
L42
L13
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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