The Effects of Consumer Protection on Sales Signs, Consumer Search and Competition

Chris M. Wilson
Additional contact information
Chris M. Wilson: University of East Anglia

Industrial Organization from University Library of Munich, Germany

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 due to a second, larger effect that improves consumer information and increases the intensity of price competition.

Keywords: Comparative Price Advertising; Deception; Obfuscation; Cheap Talk (search for similar items in EconPapers)
JEL-codes: D43 D83 L10 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2005-10-24
New Economics Papers: this item is included in nep-com, nep-mic and nep-mkt
Note: Type of Document - pdf; pages: 24
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://econwpa.ub.uni-muenchen.de/econ-wp/io/papers/0510/0510007.pdf (application/pdf)

Related works:
Working Paper: The Effects of Consumer Protection on Sales Signs, Consumer Search and Competition (2005)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpio:0510007

Access Statistics for this paper

More papers in Industrial Organization from University Library of Munich, Germany
Bibliographic data for series maintained by EconWPA ( this e-mail address is bad, please contact ).