Chapter

Coarse Reasoning

Spiegler Ran

in Bounded Rationality and Industrial Organization

Published in print February 2011 | ISBN: 9780195398717
Published online September 2011 | e-ISBN: 9780199896790 | DOI: http://dx.doi.org/10.1093/acprof:oso/9780195398717.003.0008
Coarse Reasoning

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This chapter introduces a model of coarse reasoning and applies it to several market models. First, the model is employed to capture limited ability to perceive complex price patterns. It is shown that a monopolist may benefit from creating complex temporal price patterns as a way to discriminate between consumers with diverse pattern-recognition abilities. Second, the model is applied to a market with adverse selection, and its implications for market failure are explored.

Keywords: coarse reasoning; complex price patterns; pattern recognition; price discrimination; adverse selection; market failure

Chapter.  7897 words. 

Subjects: Economics

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