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E-mail Message: I thought you might be interested in this item at http://www.worldcat.org/oclc/64386630 Title: Shrouded attributes, consumer myopia, and information suppression in competitive markets Author: Xavier Gabaix; Massachusetts Institute of Technology. Dept. of Economics Publisher: Cambridge, MA : Massachusetts Institute of Technology, Dept. of Economics, [2005] OCLC:64386630

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Shrouded attributes, consumer myopia, and information suppression in competitive markets

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Shrouded attributes, consumer myopia, and information suppression in competitive markets

Author:	Xavier Gabaix; Massachusetts Institute of Technology. Dept. of Economics.
Publisher:	Cambridge, MA : Massachusetts Institute of Technology, Dept. of Economics, [2005]
Series:	Working paper (Massachusetts Institute of Technology. Dept. of Economics), no. 05-18.
Edition/Format:	Book : Document : English : RevView all editions and formats
Summary:	Bayesian consumers infer that hidden add-on prices (e.g. the cost of ink for a printer) are likely to be high prices. If consumers are Bayesian, firms will not shroud information in equilibrium. However, shrouding may occur in an economy with some myopic (or unaware) consumers. Such shrouding creates an inefficiency, which firms may have an incentive to eliminate by educating their competitors' customers. However, if Read more...
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Material Type:	Document, Internet resource
Document Type:	Book, Computer File, Internet Resource
All Authors / Contributors:	Xavier Gabaix; Massachusetts Institute of Technology. Dept. of Economics. Find more information about:
OCLC Number:	64386630
Notes:	"April 11, 2005; Revised October 3, 2005."
Description:	36 p. ; 28 cm.
Series Title:	Working paper (Massachusetts Institute of Technology. Dept. of Economics), no. 05-18.
Responsibility:	Xavier Gabaix [and] David Laibson.

Abstract:

Bayesian consumers infer that hidden add-on prices (e.g. the cost of ink for a printer) are likely to be high prices. If consumers are Bayesian, firms will not shroud information in equilibrium. However, shrouding may occur in an economy with some myopic (or unaware) consumers. Such shrouding creates an inefficiency, which firms may have an incentive to eliminate by educating their competitors' customers. However, if add-ons have close substitutes, a "curse of debiasing" arises, and firms will not be able to profitably debias consumers by unshrouding add-ons. In equilibrium, two kinds of exploitation coexist. Optimizing firms exploit myopic consumers through marketing schemes that shroud high-priced add-ons. In turn, sophisticated consumers exploit these marketing schemes. It is not possible to profitably drive away the business of sophisticates. It is also not possible to profitably lure either myopes or sophisticates to non-exploitative firms. We show that informational shrouding flourishes even in highly competitive markets, even in markets with costless advertising, and even when the shrouding generates allocational inefficiencies. Keywords: behavioral economics, bounded rationality, consumer protection, information. JEL Classifications: D00, D60, D80, L00.

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