The Effects of Consumer Protection on Sales Signs, Consumer Search and Competition
CCP Working Paper No. 05-09
Posted: 31 Oct 2005
Date Written: October 2005
Abstract
Within a one-shot, duopoly game, we show that firms cannot use false in-store price comparisons to deter rational consumers from further beneficial price search in an effort to create market power. However, by introducing a consumer protection authority that monitors price comparisons, we formalise Nelson's (1974) conjecture by showing that 'middle-order' monitoring can actually facilitate the deception of fully rational consumers, to deter them from otherwise optimal search. Despite this effect, we show that no increase in monitoring can ever harm consumers thanks to a second, larger effect that improves consumer information and increases the intensity of price competition.
Keywords: Comparative Price Advertising, Deception, Obfuscation, Cheap Talk
JEL Classification: L10, D43, D83
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Comparative Advertising and Competition Policy
By Francesca Barigozzi and Martin Peitz
-
With a Little Help from My Enemy: Comparative Advertising as a Signal of Quality
By Francesca Barigozzi, Paolo G. Garella, ...
-
Non-Comparative Versus Comparative Advertising as a Quality Signal
By Winand Emons and Claude Fluet
-
Non-Comparative Versus Comparative Advertising of Quality
By Winand Emons and Claude Fluet
-
Non-Comparative versus Comparative Advertising of Quality
By Winand Emons and Claude Fluet
-
Push-Me Pull-You: Comparative Advertising in the OTC Analgesics Industry
By Simon P. Anderson, Federico Ciliberto, ...
-
Push-Me Pull-You: Comparative Advertising in the OTC Analgesics Industry
By Simon P. Anderson, Federico Ciliberto, ...
-
Oligopoly Limit-Pricing in the Lab
By Wieland Müller, Yossi Spiegel, ...