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Obfuscation and rational inattention
Janssen,Aljoscha Kasinger,Johannes
Janssen,Aljoscha
Kasinger,Johannes
Abstract
We study the behavior of duopolistic firms that can obfuscate their prices before competing on price. Obfuscation affects the rational inattentive consumers' optimal information strategy, which determines the probabilistic demand. Our model advances related models by allowing consumers to update their unrestricted prior beliefs with an informative signal of any form. We show that the game may result in an obfuscation equilibrium with high prices or a transparency equilibrium with low prices and no obfuscation, providing an argument for market regulation. Obfuscation equilibria cease to exist for low information costs and if one firm seems a priori considerably more attractive.
Description
Date
2024-03
Journal Title
Journal ISSN
Volume Title
Publisher
Research Projects
Organizational Units
Journal Issue
Keywords
Choice, Complexity, Health-insurance, Inertia, Information suppression, Market, Model, Prominence, Search, Shrouded attributes
Citation
Janssen, A & Kasinger, J 2024, 'Obfuscation and rational inattention', Journal of Industrial Economics, vol. 72, no. 1, pp. 390-428. https://doi.org/10.1111/joie.12362
License
info:eu-repo/semantics/openAccess