Strategic Obfuscation: Information Costs as a Tool to Influence Consumers

Monte, Daniel and Linhares, Luis Henrique (2023): Strategic Obfuscation: Information Costs as a Tool to Influence Consumers.

Abstract

We develop a model of strategic obfuscation in which a firm chooses the cost for a rationally inattentive consumer to process product information, making learning costs endogenous. Our characterization of how obfuscation arises in equilibrium depends on the prior and the consumer’s payoff structure, which determines when she is indifferent between actions. Surprisingly, the firm may encourage partial learning to sustain sales while inducing mistakes. The framework links persuasion and rational inattention, shifting attention from commitment in disclosure to information cost design. The model rationalizes hidden add-ons, fine print, and product complexity, and informs policies on disclosure and transparency.

• Item Type: MPRA Paper
• Language: English
• Keywords: rational inattention, strategic obfuscation, costly information
• Subjects: D - Microeconomics > D0 - General; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty

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