Antitrust & Competition Policy Blog

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Levin College of Law

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Friday, March 28, 2014

Consumer Myopia, Competition and the Incentives to Unshroud Add-on Information

Tobias Wenzel, Dusseldorf Institute for Competition Economics (DICE) explains Consumer Myopia, Competition and the Incentives to Unshroud Add-on Information.

ABSTRACT: This paper studies unshrouding decisions in a framework similar to Gabaix and Laibson (2006), but considers an alternative unshrouding mechanism where the impact of advertising add-on information depends on the number of unshrouding firms. We show that shrouding becomes less prevalent as the number of competing firms increases. With unshrouding costs a non-monotonic relationship between the number of firms and unshrouding may arise.

http://lawprofessors.typepad.com/antitrustprof_blog/2014/03/consumer-myopia-competition-and-the-incentives-to-unshroud-add-on-information.html

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