Preferences, confusion and competition

Arbeitspapier

Do firms seek to make the market transparent,or do they confuse the consumers in their product perceptions? We show that the answer to this question depends decisively on preference heterogeneity. Contrary to the well-studied case of homogeneous goods, confusion is not necessarily an equilibrium in markets with differentiated goods. In particular, if the taste distribution is polarized, so that indifferent consumers are relatively rare, firms strive to fully educate consumers. By contrast, if the taste distribution features a concentration of indecisive consumers, confusion becomes part of the equilibrium strategies. The adverse welfare consequences of confusion can be more severe than with homogeneous goods, as consumers may not only pay higher prices, but also choose a dominated option, or inefficiently refrain from buying. Qualitatively similar insights obtain for political contests, in which candidates compete for voters with heterogeneous preferences.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Working Paper ; No. 344

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Field Experiments ; Analysis of Education ; Education and Inequality ; Returns to Education ; Human Capital; Skills; Occupational Choice; Labor Productivity
• Thema: Obfuscation ; consumer confusion ; differentiated products ; price competition ; polarized/indecisive preferences ; political competition

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Hefti, Andreas ; Liu, Shuo ; Schmutzler, Armin
• Ereignis: Veröffentlichung
• (wer): University of Zurich, Department of Economics
• (wo): Zurich
• (wann): 2020

Weitere Informationen

• DOI: doi:10.5167/uzh-187397
• Handle: http://hdl.handle.net/10419/216845
• Letzte Aktualisierung: 10.03.2025, 11:42 MEZ