Price Competition with Consumer Confusion
Chioveanu and Zhou model identical sellers of a homogeneous product competing in both prices and price frames, meaning the ways in which price information is presented. Frame choices affect how comparable offers are and may cause consumer confusion and lower price sensitivity. In equilibrium, firms randomise their frame choices in order to obfuscate price comparisons and sustain positive profits, with the nature of the equilibrium depending on whether frame differentiation or frame complexity is the more confusing. The result this publication carries into its pricing articles is the counterintuitive one: an increase in the number of competitors induces firms to rely more on frame complexity, and this may boost industry profits and lower consumer surplus. A busier category is not necessarily a clearer one.
Chioveanu and Zhou model identical sellers of a homogeneous product competing in both prices and price frames, meaning the ways in which price information is presented. Frame choices affect how comparable offers are and may cause consumer confusion and lower price sensitivity. In equilibrium, firms randomise their frame choices in order to obfuscate price comparisons and sustain positive profits, with the nature of the equilibrium depending on whether frame differentiation or frame complexity is the more confusing. The result this publication carries into its pricing articles is the counterintuitive one: an increase in the number of competitors induces firms to rely more on frame complexity, and this may boost industry profits and lower consumer surplus. A busier category is not necessarily a clearer one.
Written from the abstract, OpenAlex.
What our sources record
Reproduced as it was written when this source was checked, figures and all.
Chioveanu, I., & Zhou, J. (2013). 'Price competition with consumer confusion.' Management Science, 59(11), 2450-2469. doi:10.1287/mnsc.2013.1716
Where we use it
- Why the Big Box Is Not the Cheap One, Why We Crave
Reliability of this reference
The link below was matched against the publisher's record on title, first author and year, and all three agree.
The source
https://doi.org/10.1287/mnsc.2013.1716
DOI: 10.1287/mnsc.2013.1716