Price disclosure rules and consumer price comparison

Stühmeier Torben


Abstract
Search frictions are regarded as a major impediment to active competition in many markets. In some markets, such as financial and retail gasoline, governments and consumer protection agencies call for compulsory price reporting. Consumers could then more easily compare the firms' offers. We show that for a given level of price comparison, mandatory price reporting indeed generally benefits consumers. Such regulation, however, feeds back into firms' strategies, resulting in lower levels of price comparison in equilibrium. This effect may dominate so that the regulation leads to higher expected market prices.

Keywords
mixed strategies; price comparison; regulation



Publication type
Research article (journal)

Peer reviewed
Yes

Publication status
Published

Year
2015

Journal
B.E. Journal of Economic Analysis & Policy

Volume
2

Pages range
815-835

Language
English

DOI