Shrouding add-on information: an experimental study

Tobias Wenzel and Hans-Theo Normann

VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy from Verein für Socialpolitik / German Economic Association

Abstract: We explore how competition affects firms obfuscation strategies in laboratory experiments. Firms sell a base good and an add-on product. The price of the add-on may be shrouded and, if so, myopic consumers pay too much. Shrouding is an equilibrium but an unshrouding equilibrium coexists. In our experiments, competition matters in that only duopolistic markets are frequently shrouded whereas fourfirm markets are not. With repeated interaction, shrouding rates do not increase. However, the opportunities to shroud facilitate tacit collusion on the base good price for the duopolies: the unshrouding equilibrium serves as a credible punishment if deviations occur.

JEL-codes: C90 L40 L41 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-com, nep-exp and nep-mkt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc15:113149

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