Armstrong, Mark and Vickers, John and Zhou, Jidong (2008): Consumer protection and the incentive to become informed.
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We discuss the impact of consumer protection policies on consumer incentives to become informed of the best deals available in the market. In a market with costly consumer search, we find that imposing a cap on suppliers' prices reduces the incentive to engage in search, with the result that prices paid by consumers (both informed and uninformed) may rise. In a related model where consumers have the ability to refuse to receive marketing, we find that this ability softens price competition and can make all consumers worse off.
|Item Type:||MPRA Paper|
|Original Title:||Consumer protection and the incentive to become informed|
|Keywords:||Consumer protection; search; price caps; advertising|
|Subjects:||D - Microeconomics > D1 - Household Behavior and Family Economics > D18 - Consumer Protection
L - Industrial Organization > L5 - Regulation and Industrial Policy > L51 - Economics of Regulation
D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D83 - Search ; Learning ; Information and Knowledge ; Communication ; Belief ; Unawareness
|Depositing User:||Mark Armstrong|
|Date Deposited:||07. Aug 2008 11:48|
|Last Modified:||18. Feb 2013 23:54|