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You are here: Home Seminars 08.12. BGSE Micro Workshop: Tobias Gamp

08.12. BGSE Micro Workshop: Tobias Gamp

BGSE Micro Workshop with Tobias Gamp (University College London)

Event details
What
  • BGSE Workshop
When Dec 08, 2017
from 12:00 to 14:00
Where faculty room
Contact Name Stephan Lauermann
Contact Email
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Topic

Deception and Competition in Search Markets

 

Abstract

We study the interplay between deception and consumer search in a search market where firms may deceive some naive consumers with inferior products that display hidden (bad) attributes. We derive an equilibrium in which both superior and inferior quality is offered and show that as search frictions vanish, superior goods are entirely driven out of the market. Deception harms sophisticated consumers, as it forces them to search longer to find a superior product. We argue that policy interventions that reduce search frictions such as the standardization of price and package formats may harm welfare. In contrast, reducing the number of naive consumers through transparency policies and education campaigns as well as a minimum quality standard and a price floor regulation can improve welfare.


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