Consumer Protection and the Incentive to Become Informed

Mark Armstrong (), John Vickers () and Jidong Zhou ()

Journal of the European Economic Association, 2009, vol. 7, issue 2-3, pages 399-410

Abstract: We discuss the impact of consumer protection policies on consumers' incentives to become informed of the best deals available in the market. In a market with costly information acquisition, we find that imposing a cap on suppliers' prices reduces the incentive to become informed of market conditions, with the result that prices paid by consumers (both informed and uninformed) may rise. In a related model where consumers have the ability to refuse to receive marketing, we find that this ability softens price competition and can make all consumers worse off. (JEL: D18, D83, L51) (c) 2009 by the European Economic Association.

JEL-codes: D18 D83 L51 (search for similar items in EconPapers)
Date: 2009

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