Friday, March 28, 2014
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.