Obfuscation Incentives of a Monopoly in a Dynamic Framework

Arthur Cazaubiel ()
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Arthur Cazaubiel: CREST

No 2016-24, Working Papers from Center for Research in Economics and Statistics

Abstract: Obfuscation is a well-known strategy developed by ?rms to lower the intensity of competition. We develop here a theoretical framework extending this result to a monopoly controlling consumer’s search costs. In a dynamic structure where the future of the monopoly is today’s competitor, as phrased by Coase’s conjecture, obfuscating some products today turns clients into myopic consumers. This myopia generates higher pro?t through an optimal price discrimination. Introducing some correlation between the valuations of the goods, we are able to describe more complex but realistic equilibria. Interestingly, there exists a correlation value above which obfuscation is no longer pro?table.

Keywords: Coase’s conjecture; multiproduct-?rm; monopoly; obfuscation; intertemporal price discrimination; sequential search model (search for similar items in EconPapers)
JEL-codes: D21 D42 D83 D92 L12 (search for similar items in EconPapers)
Pages: 34
Date: 2016-06
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