A micro foundation of obfuscation: time cost, strategic complexity and consumer deadlines

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http://hdl.handle.net/10138/208449
Title: A micro foundation of obfuscation: time cost, strategic complexity and consumer deadlines
Author: Hämäläinen, Saara
Publisher: HECER – Helsinki Center of Economic Research
Date: 2017-08
Language: en
Belongs to series: HECER, Discussion Paper No. 414
ISSN: 1795-0562
URI: http://hdl.handle.net/10138/208449
Abstract: We consider a price search model with gradual information arrival and deadlines to study how consumers search within and across stores during a single search spell. This renders the effects of search costs smooth and allows us to endogenize the intensity of competition in a new way that avoids both Diamond and Bertrand paradoxes. Firms can commit to any choice complexity levels. They determine the relative numbers of informed and uninformed consumers, which equal in equilibrium. The outcome is thus halfway from Diamond and Bertrand equilibria. Wider price awareness and advertizing improves welfare by discouraging the prominent firm's obfuscation.


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