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T-Space at The University of Toronto Libraries >
Theoretical Economics >
Volume 1, Number 2 (June 2006) >

Please use this identifier to cite or link to this item: http://hdl.handle.net/1807/9416

Title: Competition over agents with boundedly rational expectations
Authors: Ran Spiegler; Tel Aviv University
Keywords: 
Bounded rationality, industrial organization, multi-dimensional pricing, law of small numbers, market exploitation, obfuscation
C79, D49, D83
Issue Date: 1-Jun-2006
Publisher: Theoretical Economics
Citation: Theoretical Economics; Vol 1, No 2 (2006); 207-231
Abstract: [This item is a preserved copy. To view the original, visit http://econtheory.org/] I study a market model in which profit-maximizing firms compete in multi-dimensional pricing strategies over a consumer, who is limited in his ability to grasp such complicated objects and therefore uses a sampling procedure to evaluate them. Firms respond to increased competition with an increased effort to obfuscate, rather than with more competitive pricing. As a result, consumer welfare is not enhanced and may even deteriorate. Specifically, when firms control both the price and the quality of each dimension, and there are diminishing returns to quality, increased competition implies an efficiency loss which is entirely borne by consumers.
URI: http://hdl.handle.net/1807/9416
Other Identifiers: http://econtheory.org/ojs/index.php/te/article/view/20060207
Rights: Authors who publish in <i>Theoretical Economics</i> will release their articles under the <a href="http://creativecommons.org/licenses/by-nc/2.5/">Creative Commons Attribution-NonCommercial license</a>. This license allows anyone to copy and distribute the article for non-commercial purposes provided that appropriate attribution is given.
Appears in Collections:Volume 1, Number 2 (June 2006)

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