Consumer protection and the incentive to become informed

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

MPRA Paper from University Library of Munich, Germany

Abstract: We discuss the impact of consumer protection policies on consumer incentives to become informed of the best deals available in the market. In a market with costly consumer search, we find that imposing a cap on suppliers' prices reduces the incentive to engage in search, 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.

Keywords: Consumer protection; search; price caps; advertising (search for similar items in EconPapers)
JEL-codes: D18 L51 D83 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-lab, nep-mic, nep-mkt and nep-reg
Date: 2008-08
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http://mpra.ub.uni-muenchen.de/9898/

Related works:
Journal Article: Consumer Protection and the Incentive to Become Informed (2009)
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Persistent link: http://EconPapers.repec.org/RePEc:pra:mprapa:9898

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