Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/95865
Authors: 
Kosfeld, Michael
Schüwer, Ulrich
Year of Publication: 
2014
Series/Report no.: 
SAFE Working Paper Series 47
Abstract: 
This paper explores consequences of consumer education on prices and welfare in retail financial markets when some consumers are naive about shrouded add-on prices and firms try to exploit it. Allowing for different information and pricing strategies we show that education is unlikely to push firms to disclose prices towards all consumers, which would be socially effifficient. Instead, price discrimination emerges as a new equilibrium. Further, due to a feedback on prices, education that is good for consumers who become sophisticated may be bad for consumers who stay naive and even for the group of all consumers as a whole.
Subjects: 
consumer education
financial literacy
bounded rationality
competition
regulation
JEL: 
D40
D80
L50
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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