English, Article, Journal or magazine article edition: Spurious Complexity and Common Standards in Markets for Consumer Goods Alexia Gaudeul; Robert Sugden

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Bookmark: http://trove.nla.gov.au/version/49103
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Spurious Complexity and Common Standards in Markets for Consumer Goods
Author
  • Alexia Gaudeul
  • Robert Sugden
Physical Description
  • preprint
Notes
  • Behavioural and industrial economists have argued that, because of cognitive limitations, consumers are liable to make sub-optimal choices in complex decision problems. Firms can exploit these limitations by introducing spurious complexity into tariff structures, weakening price competition. This paper models a countervailing force. Consumers’ choice problems are simplified if competing firms follow common conventions about tariff structures. Because such a ‘common standard’ promotes price competition, a firm’s use of it signals that its products offer value for money. If consumers recognize this effect, there can be a stable equilibrium in which firms use common standards and set competitive prices.
  • decision-making, naïve consumers, savvy consumers, price competition, common standard effect, cognitive limitations.
  • RePEc:ccp:wpaper:wp07-20
Language
  • English
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