Biased Beliefs in Search Markets

Arbeitspapier

We study the implications of biased consumer beliefs for search market outcomes in the seminal framework due to Diamond (1971). Biased consumers base their search strategy on a belief function which specifies for any (true) distribution of utility offers in the market a possibly incorrect distribution of utility offers. If biased consumers overestimate the best offer in the market, a novel type of equilibrium may emerge in which firms make exceptionally favourable offers in order to meet biased consumers' unreasonable high expectations which then become partially self-fulfilling. Consequently, the presence of biased consumers may improve the welfare of all consumers.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Discussion Paper ; No. 365

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Consumer Protection ; Firm Behavior: Theory ; Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection ; Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
• Thema: consumer search ; bounded rationality ; cursed beliefs

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Gamp, Tobias ; Krähmer, Daniel
• Ereignis: Veröffentlichung
• (wer): Ludwig-Maximilians-Universität München und Humboldt-Universität zu Berlin, Collaborative Research Center Transregio 190 - Rationality and Competition
• (wo): München und Berlin
• (wann): 2022

Weitere Informationen

• Handle: http://hdl.handle.net/10419/282057
• Letzte Aktualisierung: 10.03.2025, 11:45 MEZ