Salience, Competition, and Decoy Goods

Fabian Herweg (), Daniel Müller and Philipp Weinschenk

No 6168, CESifo Working Paper Series from CESifo

Abstract: We consider a brand manufacturer who can offer, next to its high-quality product, also a decoy good and faces competition by a competitive fringe that produces low quality. We show that the brand manufacturer optimally provides a decoy good to boost the demand for its main product if consumers’ purchasing decisions are distorted by salient thinking. The optimal decoy good is designed such that the superior quality of the brand manufacturers’ main product and the unattractive feature of the fringe product are salient.

Keywords: competition; decoy good; salience (search for similar items in EconPapers)
JEL-codes: D03 D21 L13 L15 (search for similar items in EconPapers)
Date: 2016
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Journal Article: Salience, competition, and decoy goods (2017)
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