Unshrouding for Competitive Advantage

Dahremöller, Carsten

doi:10.2139/ssrn.1721013

Cited by 10 publications

(10 citation statements)

References 22 publications

Supporting

Mentioning

Contrasting

Unclassified

Order By: Relevance

“…Literature on shrouded attributes. A growing literature studies incentives of firms to shroud fees to naive consumers who underestimate total expenses (Dahremöller, 2013, Gabaix and Laibson, 2006, Heidhues et al, 2016a,b, Johnen, 2019, Kosfeld and Schüwer, 2017, Murooka, 2015. Most of these papers study incentives of firms to unshroud their own fees towards naive consumers.…”

Section: Related Literaturementioning

confidence: 99%

Deceptive Products on Platforms

Johnen

Somogyi

2019

SSRN Journal

View full text Add to dashboard Cite

On many online platforms, sellers offer products with additional fees and features. Platforms often deliberately shroud these fees from consumers. Examples are shipping fees, luggage fees on flight-aggregator websites, or resort fees and upgrades on hotel booking platforms. We explore the incentives of two-sided platforms to disclose additional fees and design a transparent marketplace when consumers might naively ignore shrouded additional fees. First, we find that platforms have stronger incentives to shroud additional fees than sellers in the absence of platforms. This result holds for monopoly platforms and in some competitive settings. Second, competition might induce platforms to regulate additional fees, which benefits consumers. We discuss connections to frequent practices like drip pricing, and platforms like Amazon or eBay regulating shipping fees.

show abstract

Section: Related Literaturementioning

confidence: 99%

Deceptive Products on Platforms

Johnen

Somogyi

2019

SSRN Journal

View full text Add to dashboard Cite

show abstract

“…Studies looking at monopoly are mainly concerned with whether or how the monopolist should charge for the add-on (see, for example, Allon et al (2011), Fruchter et al (2011)). 4 On the other hand, in a duopoly setting, Verboven (1999), Ellison (2005), Gabaix and Laibson (2006), Dahremöller (2013), and Shulman and Geng (2013) theoretically analyze how firms price add-on when some or all consumers are not aware of the add-on fees. Other research such as Shugan et al (2016) and Lin (2017) explains why firms price add-on in some cases instead of others.…”

Section: Literature Reviewmentioning

confidence: 99%

The Impact of Carry-On Baggage Fee and the Differential Burden on Regional Airlines

Kim

Liu

2018

SSRN Journal

View full text Add to dashboard Cite

“…Obfuscation has received much attention of late in the literature on behavioral industrial organization. One strand of this literature, building on Gabaix and Laibson (2006), considers whether firms will directly withhold information about add-on pricing to naive consumers who are unaware of its use (see, e.g., Kosfeld and Schuwer 2011;Armstrong and Vickers 2012;Heidhues et al 2012;Dahremoller 2013;Heidhues et al 2014). Another strand, including Eliaz and Spiegler (2011), Piccione and Spiegler (2012), and Chioveanu and Zhou (2013), explores how firms may indirectly withhold information from consumers by presenting their products in different frames, limiting comparability with their rivals.…”

Section: Introductionmentioning

confidence: 99%

Sellouts, Beliefs, and Bandwagon Behavior

Vikander

2018

The B.E. Journal of Theoretical Economics

View full text Add to dashboard Cite

This paper examines how a firm can strategically use sellouts to influence consumers’ beliefs about its product’s popularity. A monopolist faces a market of conformist consumers, whose willingness to pay is increasing in their beliefs about aggregate demand. Consumers are broadly rational but have limited strategic reasoning about the firm’s incentives. Formally, I apply the concept of a ‘cursed equilibrium’, where consumers neglect how the firm’s chosen actions might be correlated with its private information about demand. I show that in a dynamic setting, the firm may choose its price and capacity so as to generate sellouts, specifically to exploit consumers’ limited reasoning. It does so to effectively conceal unfavorable information from consumers about past demand in a way that increases future profits. Sellouts tend to occur when demand is low, rather than high, and may be accompanied by introductory pricing. The analysis also demonstrates that the firm’s ability to mislead some consumers always benefits certain others, and can result in higher overall consumer surplus.

show abstract

Unshrouding for Competitive Advantage

Cited by 10 publications

References 22 publications

Deceptive Products on Platforms

Deceptive Products on Platforms

The Impact of Carry-On Baggage Fee and the Differential Burden on Regional Airlines

Sellouts, Beliefs, and Bandwagon Behavior

Contact Info

Product

Resources

About