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19.07. Micro Theory Seminar: Tobit Gamp

Micro Theory Seminar with Tobit Gamp (University College London)

Event details
What
  • Micro Theory Seminar
When Jul 19, 2017
from 16:30 to 17:45
Where faculty room
Contact Name Stephan Lauermann
Contact Email
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Topic

Deceptive Products and Competition in Search Markets 

Abstract

We study a search market where firms have a choice between offering either efficient, high quality ("candid") products or inefficient, low quality ("deceptive") products which some ("naive") consumers fail to recognize as such. We derive an equilibrium in which both business models co-exist and show that as search frictions vanish, high quality goods are entirely driven out of the market. We show that market share and price dynamics can be non-monotone in search frictions, and we argue that while policy interventions that reduce search frictions such as the standardization of price and package formats may harm welfare, a price floor regulation and a minimum quality standard can improve welfare.

 

 

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