Publication Type

Journal Article

Version

submittedVersion

Publication Date

11-2023

Abstract

We study the behavior of duopolistic firms that can obfuscate their prices before competing on price. Obfuscation affects the rational inattentive consumers' optimal information strategy, which determines the probabilistic demand. Our model advances related models by allowing consumers to update their unrestricted prior beliefs with an informative signal of any form. We show that the game may result in an obfuscation equilibrium with high prices or a transparency equilibrium with low prices and no obfuscation, providing an argument for market regulation. Obfuscation equilibria cease to exist for low information costs and if one firm seems a priori considerably more attractive.

Keywords

Rational Inattention, Obfuscation, Price Competition, Digitalized Markets

Discipline

Economic Theory | Industrial Organization

Research Areas

Applied Microeconomics

Publication

Journal of Industrial Economics

First Page

1

Last Page

39

ISSN

0022-1821

Identifier

10.1111/joie.12362

Publisher

Wiley

Copyright Owner and License

Authors

Additional URL

https://doi.org/10.1111/joie.12362

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