Hostname: page-component-7b9c58cd5d-6tpvb Total loading time: 0 Render date: 2025-03-23T15:14:35.109Z Has data issue: false hasContentIssue false
  • English
  • Français

Confusopoly: competition and obfuscation in markets

Published online by Cambridge University Press:  14 March 2025

Kenan Kalaycı
Kenan Kalaycı*
Affiliation:
School of Economics, University of Queensland, Colin Clark Building (39), St. Lucia, QLD 4072, Australia
*
[email protected]
Get access Rights & Permissions [Opens in a new window]

Abstract

This paper examines the effects of competition in experimental posted-offer markets where sellers can confuse buyers. I report two studies. In one, the sellers offering heterogeneous goods can obfuscate buyers by means of spurious product differentiation. In the other study, sellers offer identical goods and make their prices unnecessarily complex by having multi-part tariffs. I vary the level of competition by having treatments with two and three- sellers in both studies, and having an additional treatment with five-sellers in one study. The results show that average complexity created by a seller is not different for the treatments with two, three and five sellers. In addition, market prices are highest and buyer surplus is lowest when there are two sellers in a market.

Keywords

ExperimentBounded rationalityBuyer confusionPrice complexityProduct complexityOligopolyC9D03D12L13
Type
Original Paper
Information
Experimental Economics , Volume 19 , Issue 2 , June 2016 , pp. 299 - 316
Copyright
Copyright © 2015 Economic Science Association

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Abbink, K, & Brandts, J (2008). 24. Pricing in Bertrand competition with increasing marginal costs. Games and Economic Behavior, 63, 1–31. 10.1016/j.geb.2007.09.007CrossRefGoogle Scholar
Armstrong, M (2008). Interactions between competition and consumer policy. Competition Policy International, 4, 97–148.Google Scholar
Basov, S, & Danilkina, S (2015). “Bertrand oligopoly with boundedly rational consumers.”. B.E. Journal of Theoretical Economics, 15, 107–123. 10.1515/bejte-2013-0077CrossRefGoogle Scholar
Bruttel, LV (2009). Group dynamics in experimental studies—the Bertrand Paradox revisited. Journal of Economic Behavior & Organization, 69, 51–63. 10.1016/j.jebo.2008.10.002CrossRefGoogle Scholar
Brown, J, Hossain, T, & Morgan, J (2010). Shrouded attributes and information suppression: Evidence from field experiments. Quarterly Journal of Economics, 125, 859–876. 10.1162/qjec.2010.125.2.859CrossRefGoogle Scholar
Carlin, B. (2009). Strategic pice complexity in financial retail markets. Journal of Financial Economics, 91, 278–287. http://www.sciencedirect.com/science/article/pii/S0304405X08002092.CrossRefGoogle Scholar
Chioveanu, I, & Zhou, J (2013). Price competition with consumer confusion. Management Science, 59, 2450–2469. 10.1287/mnsc.2013.1716CrossRefGoogle Scholar
Choi, J, Laibson, D, & Madrian, B (2010). Why does the law of one price fail? An experiment on index mutual funds. Review of Financial Studies., 23, 1405–1432. 10.1093/rfs/hhp097CrossRefGoogle ScholarPubMed
DellaVigna, S, & Malmendier, U (2004). Contract design and self-control: Theory and evidence. Quarterly Journal of Economics, 119, 353–402. 10.1162/0033553041382111CrossRefGoogle Scholar
Dufwenberg, M, & Gneezy, U (2000). Price competition and market concentration: an experimental study. International Journal of Industrial Organization, 18, 7–22. 10.1016/S0167-7187(99)00031-4CrossRefGoogle Scholar
Commission, European (2009). Common position (ec) no 16/2009. Official Journal of the European Union.Google Scholar
Gabaix, X., & Laibson, D. (2004). Competition and consumer confusion. Harvard and MIT mimeo.Google Scholar
Gabaix, X, & Laibson, D (2006). Shrouded attributes, consumer myopia, and information suppression in competitive markets. Quarterly Journal of Economics, 121, 505–540. 10.1162/qjec.2006.121.2.505CrossRefGoogle Scholar
Gu, Y, & Wenzel, T (2014). Strategic obfuscation and consumer protection policy. The Journal of Industrial Economics, 62(4), 632–660. 10.1111/joie.12060CrossRefGoogle Scholar
Fischbacher, U (2007). z-Tree: Zurich toolbox for ready-made economic experiments. Experimental Economics, 10, 171–178. 10.1007/s10683-006-9159-4CrossRefGoogle Scholar
Frank, RG, & Lamiraud, K (2009). Choice, price competition and complexity in markets for health insurance. Journal of Economic Behavior and Organization., 71, 550–562. 10.1016/j.jebo.2009.04.005CrossRefGoogle Scholar
Hortacsu, A, & Syverson, C (2004). Product differentiation, search costs, and competition in the mutual fund industry: A case study of S&P 500 index funds. Quarterly Journal of Economics., 119, 403–456. 10.1162/0033553041382184CrossRefGoogle Scholar
Huck, S, Normann, H-T, & Oechssler, J (2004). Two are few and four are many: Number effects in experimental oligopolies. Journal of Economic Behavior & Organization, 53, 435–446. 10.1016/j.jebo.2002.10.002CrossRefGoogle Scholar
Huck, S., & Zhou, J. (2011). Consumer behavioral biases in competition: A survey. Working paper, Department of Economics, University College London, Gower Street, London, England.Google Scholar
Kalaycı, K, & Potters, J (2011). Buyer confusion and market prices. International Journal of Industrial Organization, 29, 14–22. 10.1016/j.ijindorg.2010.06.004CrossRefGoogle Scholar
Kalaycı, K (2015). Price complexity and buyer confusion in markets. Journal of Economic Behavior and Organization, 111, 154–168. 10.1016/j.jebo.2015.01.001CrossRefGoogle Scholar
Luce, RD (1959). Individual choice behavior, New York: Wiley.Google Scholar
Orzen, H (2008). Counterintuitive number effects in experimental oligopolies. Experimental Economics, 11, 390–401. 10.1007/s10683-007-9174-0CrossRefGoogle Scholar
Piccione, M, & Spiegler, R (2012). Price competition under limited comparability. Quarterly Journal of Economics, 127, 97–135. 10.1093/qje/qjr053CrossRefGoogle Scholar