EXCESSIVE COMPETITION ON HEADLINE PRICES

• 成果类型: Article
• 署名作者: Inderst, Roman; Obradovits, Martin
• 署名单位: Goethe University Frankfurt; University of Innsbruck
• 刊物名称: INTERNATIONAL ECONOMIC REVIEW
• ISSN/ISSBN: 0020-6598
• DOI: 10.1111/iere.12616
• 发表日期: 2023
• 页码: 783-808
• 关键词: model; SALIENCE; consumers

摘要

In a variety of purchasing situations, consumers may focus primarily on headline prices, disregarding the full costs associated with acquiring and maintaining a product or service contract. Even when this is the case, the literature has delineated various circumstances where intense competition can protect consumers through the so-called waterbed effect. In this article, we however show that when consumers have context-dependent preferences, competition may rather exacerbate their and society's harm by distorting product choice and provision. Then, consumer protection policy must sufficiently constrain hidden fees so that competition, along with high-quality firms' incentives to educate consumers, can restore efficiency.