Search and ripoff externalities

Armstrong, Mark (2015): Search and ripoff externalities.

Abstract

This paper surveys models of markets in which only some consumers are "savvy". I discuss when the presence of savvy consumers improves the deals available to all consumers in the market (the case of search externalities), and when the non-savvy fund generous deals for all consumers (ripoff externalities). I also discuss when the two groups of consumers have aligned or divergent views about market interventions. The analysis focusses on two kinds of models: (i) an indivisible product in a market with price dispersion, and (ii) products which involve add-on pricing.

• Item Type: MPRA Paper
• Language: English
• Keywords: Add-on pricing, bounded rationality, consumer protection, consumer search, externalities, price dispersion
• Subjects: D - Microeconomics > D1 - Household Behavior and Family Economics > D11 - Consumer Economics: Theory; D - Microeconomics > D1 - Household Behavior and Family Economics > D18 - Consumer Protection; D - Microeconomics > D4 - Market Structure, Pricing, and Design; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D83 - Search ; Learning ; Information and Knowledge ; Communication ; Belief ; Unawareness; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D86 - Economics of Contract: Theory; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance

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