Spurious Complexity and Common Standards in Markets for Consumer Goods

Alexia Gaudeul
Authors registered in the RePEc Author Service: Robert Sugden

MPRA Paper from University Library of Munich, Germany

Abstract: Behavioural and industrial economists have argued that, because of cognitive limitations, consumers are liable to make sub-optimal choices in complex decision problems. Firms can exploit these limitations by introducing spurious complexity into tariff structures, weakening price competition. This paper models a countervailing force. Consumers' choice problems are simplified if competing firms follow common conventions about tariff structures. Because such a 'common standard' promotes price competition, a firm's use of it signals that its products offer value for money. If consumers recognize this effect, there can be a stable equilibrium in which firms use common standards and set competitive prices.

Keywords: decision-making; naïve consumers; savvy consumers; price competition; common standard effect; cognitive limitations (search for similar items in EconPapers)
JEL-codes: D83 L13 L51 (search for similar items in EconPapers)
Date: 2007-11
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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https://mpra.ub.uni-muenchen.de/19647/1/MPRA_paper_19647.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/19761/1/MPRA_paper_19761.pdf revised version (application/pdf)

Related works:
Journal Article: Spurious Complexity and Common Standards in Markets for Consumer Goods (2012)
Working Paper: Spurious complexity and common standards in markets for consumer goods (2009)
Working Paper: Spurious Complexity and Common Standards in Markets for Consumer Goods (2007)
Working Paper: Spurious Complexity and Common Standards in Markets for Consumer Goods (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:19647

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