Buridanic Competition

Benjamin Bachi and Ran Spiegler ()

No 275793, Foerder Institute for Economic Research Working Papers from Tel-Aviv University > Foerder Institute for Economic Research

Abstract: We analyze a model in which two profit-maximizing firms compete in two-attribute products over agents who follow a non-compensatory choice procedure that responds purely to ordinal quality rankings: sticking to a default option when no market alternative dominates another, and focusing on a random attribute when choosing by default is impossible. Our equilibrium analysis highlights the effect of such trade-off avoidance on various aspects of the market outcome: total quality of the offered products, amount of obfuscation, prevalence of "hard choices", as well as market participation and consumer switching rates. We discuss the potential implications of this analysis for "default architecture".

Keywords: Financial; Economics (search for similar items in EconPapers)
Pages: 39
Date: 2014-01
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Citations: View citations in EconPapers (2)

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Journal Article: Buridanic competition (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:isfiwp:275793

DOI: 10.22004/ag.econ.275793

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