Pricing in retail financial markets and the fallacies of consumer education

Arbeitspapier

We analyze the consequences of consumer education on prices and welfare in retail financial markets when some consumers are naive about shrouded add-on prices and banks try to exploit this. Allowing for different information and pricing strategies we show that education is unlikely to push banks to full price disclosure, which would be efficient, but instead to a new equilibrium in which banks discriminate between consumer types. Welfare analysis reveals that education, while positive for consumers who learn to make better financial decisions, imposes a negative externality on other consumers when banks respond by setting higher prices. Overall, the welfare effects of consumer education can be negative. Our results identify important pitfalls policy makers should take into account when considering the seemingly harmless intervention of consumer education.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: SAFE Working Paper ; No. 47

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Market Structure, Pricing, and Design: General ; Information, Knowledge, and Uncertainty: General ; Regulation and Industrial Policy: General
• Thema: Consumer education ; financial literacy ; pricing strategies ; bounded rationality ; welfare effects

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Kosfeld, Michael ; Schüwer, Ulrich
• Ereignis: Veröffentlichung
• (wer): Goethe University Frankfurt, SAFE - Sustainable Architecture for Finance in Europe
• (wo): Frankfurt a. M.
• (wann): 2016

Weitere Informationen

• DOI: doi:10.2139/ssrn.2418171
• Handle: http://hdl.handle.net/10419/203275
• Letzte Aktualisierung: 10.03.2025, 11:42 MEZ