Add-on pricing, naive consumers, and the hidden welfare costs of education

Arbeitspapier

Previous research shows that firms shroud high add-on prices in competitive markets with naive consumers leading to inefficiency. We analyze the effects of regulatory intervention via educating naive consumers on equilibrium prices and welfare. Our model allows firms to shroud, unshroud, or partially unshroud add-on prices. Results show that consumer education may increase welfare; however, it may also decrease welfare if education is insufficient to alter the equilibrium information and pricing strategy of firms. Educating consumers may do more harm than good and should thus only be considered if the regulator is sufficiently well informed about consumer and firm behavior.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: IZA Discussion Papers ; No. 6061

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Market Structure, Pricing, and Design: General ; Information, Knowledge, and Uncertainty: General ; Regulation and Industrial Policy: General
• Thema: bounded rationality ; competition ; regulation ; welfare ; consumer protection ; Betriebliche Preispolitik ; Wettbewerb ; Verbraucherschutz ; Regulierung ; Konsumentenverhalten ; Lernen ; Wohlfahrtsanalyse

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Kosfeld, Michael ; Schüwer, Ulrich
• Ereignis: Veröffentlichung
• (wer): Institute for the Study of Labor (IZA)
• (wo): Bonn
• (wann): 2011

Weitere Informationen

• Handle: http://hdl.handle.net/10419/58469
• URN: urn:nbn:de:101:1-201111072755
• Letzte Aktualisierung: 10.03.2025, 11:43 MEZ