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Price Deception, Market Power and Consumer Policy

Chris Wilson ()
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Chris Wilson: Department of Economics, University of Oxford

No 04-1, Working Papers from Centre for Competition Policy, University of East Anglia

Abstract: This paper presents a model in which a firm attempts to gain market power by pricing above the competitive market price and simply trying to persuade ill-informed consumers not to search for other lower priced firms. Fictitious price comparisons, or false sale signs could be used in this way to deceptively and profitably deter consumer search. A simplified model shows how this mechanism could exist when combined with moderately enforced consumer regulatory policy.

Keywords: Price communications; search deterrence; market power; cheap talk (search for similar items in EconPapers)
JEL-codes: D83 D82 L13 L49 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2004-09
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