Add-on Pricing, Consumer Myopia and Regulatory Intervention

Konferenzbeitrag

Previous research shows that firms may offer excessively high (and shrouded) add-on prices in competitive markets when some consumers are myopic. We analyze the effects of regulatory intervention via educating myopic consumers on equilibrium strategies of firms, consumer protection and welfare. Our model allows firms to price discriminate between consumers. We show that intervention may actually decrease social welfare and weaken consumer protection if regulatory efforts are insufficient to alter the equilibrium strategy of firms. In consequence, regulation may do more harm than good and hence should only be considered if the regulator can be sure to have a good understanding of pricing strategies in an industry.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Beiträge zur Jahrestagung des Vereins für Socialpolitik 2010: Ökonomie der Familie - Session: Regulation and Pricing Policies ; No. F8-V2

Classification and Topics

• Classification: Wirtschaft ; Regulation and Industrial Policy: General ; Market Structure, Pricing, and Design: General ; Information, Knowledge, and Uncertainty: General
• Subject: bounded rationality ; information suppression ; regulation ; social welfare ; consumer protection

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Schüwer, Ulrich ; Kosfeld, Michael
• Event: Veröffentlichung
• (who): Verein für Socialpolitik
• (where): Frankfurt a. M.
• (when): 2010

Further information

• Handle: http://hdl.handle.net/10419/37278
• Last update: 10.03.2025, 11:42 AM CET