Choosing whether to compete: Price and format competition with consumer confusion

Arbeitspapier

We run a market experiment where firms can choose not only their price but also whether to present comparable offers. They are faced with artificial demand from consumers who make mistakes when assessing the net value of products on the market. If some offers are comparable however, some consumers favor the best of the comparable offers vs. non-comparable offers. We vary the number of such consumers as well as the strength of their preferences for the best of the comparable offers. In treatments where firms observe the past decisions of their competitors, firms learn not to present comparable offers especially when many consumers prefer comparable offers. This occurs after initial periods with strong competition and leads to lower welfare for all consumers. In treatments where firms cannot monitor the competition, firms end up having to present comparable offers, which leads to an improvement in welfare for all consumers.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Jena Economic Research Papers ; No. 2014-026

Classification and Topics

• Classification: Wirtschaft ; Design of Experiments: Laboratory, Group Behavior ; Consumer Protection ; Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection ; Oligopoly and Other Imperfect Markets ; Information and Product Quality; Standardization and Compatibility
• Subject: asymmetric dominance ; attraction effect ; collusion ; competition ; confusopoly ; experiment ; framing ; industrial organization ; obfuscation ; oligopoly ; price comparison ; shrouding ; spurious complexity ; standardization ; transparency

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Crosetto, Paolo ; Gaudeul, Alexia
• Event: Veröffentlichung
• (who): Friedrich Schiller University Jena and Max Planck Institute of Economics
• (where): Jena
• (when): 2014

Further information

• Handle: http://hdl.handle.net/10419/108534
• Last update: 10.03.2025, 11:43 AM CET