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
Citation
JANSSEN, Aljoscha and KASINGER, Johannes.
Obfuscation and Rational Inattention. (2023). Journal of Industrial Economics. 1-39.
Available at: https://ink.library.smu.edu.sg/soe_research/2704
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.1111/joie.12362