A more general model of price complexity

Chioveanu, Ioana

Abstract

This paper analyses a model of competition where the …rms set not only prices but also the complexity levels of their prices (which determine how di¢ cult it is for consumers to assess the price o¤ers). Unlike previous work, in this model, the …rms'confusion technology may be non-linear in the aggregate complexity level. The equilibrium probability of using high complexity increases in the number of …rms but decreases in the convexity of the confusion technology. In large markets, the …rms use high complexity almost surely. However, the industry pro…t converges to the highest level with concave technologies and to the lowest level with convex technologies. An increase in consumer sophistication, which bene…ts the consumers, may not reduce market complexity.

Citation

Chioveanu, I. (2020). A more general model of price complexity. International Journal of Industrial Organization, 69, Article 102563. https://doi.org/10.1016/j.ijindorg.2019.102563

• Journal Article Type: Article
• Acceptance Date: Nov 16, 2019
• Online Publication Date: Nov 28, 2019
• Publication Date: Mar 1, 2020
• Deposit Date: Mar 3, 2020
• Publicly Available Date: Nov 29, 2021
• Journal: International Journal of Industrial Organization
• Print ISSN: 0167-7187
• Electronic ISSN: 1873-7986
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 69
• Article Number: 102563
• DOI: https://doi.org/10.1016/j.ijindorg.2019.102563
• Keywords: price complexity; confusion technology; concavity/convexity; oligopoly markets
• Public URL: https://nottingham-repository.worktribe.com/output/4084580
• Publisher URL: https://www.sciencedirect.com/science/article/pii/S0167718719300918
• Additional Information: Chioveanu, I. (2020). A more general model of price complexity. International Journal of Industrial Organization, 69, 102563. https://doi.org/10.1016/j.ijindorg.2019.102563