Sampling-Based Reasoning II: Obfuscation

Spiegler Ran

in Bounded Rationality and Industrial Organization

Published in print February 2011 | ISBN: 9780195398717
Published online September 2011 | e-ISBN: 9780199896790 | DOI:
Sampling-Based Reasoning II: Obfuscation

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This chapter extends the analysis of competitive markets when consumers employ sampling-based reasoning to situations in which firms can use obfuscation strategies to create price complexity. It is shown that greater competition increases the equilibrium use of obfuscation, without lowering expected prices, and may even create production inefficiency. Consumer protection policies that introduce simple options may be counter-productive in terms of consumer welfare.

Keywords: sampling; sampling-based reasoning; price complexity; obfuscation; regulation; consumer protection; production inefficiency; simple options

Chapter.  8286 words. 

Subjects: Economics

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