Binur Yermukanova

Job market
University of origin:
Nazarbayev University (Kazakhstan)

Admission year: 2019
email:: binur.yermukanova@ua.es
Office: 0031PS041
Ext.: 2535

Consumer Myopia and Experience

Abstract: Firms often exploit consumers when consumers do not fully understand the markets. In so-called add-on markets (markets with complementary goods) firms often try to hide/shroud information about the price of the add-on product if myopic consumers exist in a market. This paper studies the extent to which consumer experience affects shrouding strategies of firms. With this aim, we propose a two-period Hotelling model of add-on markets, where consumers staying in the market in a later period learn about shrouding and pricing strategies of firms. We find co-existence of shrouding and unshrouding equilibria with high add-on prices when the level of consumer experience is low and the level of consumer myopia is high enough in the market. The results are robust in an infinite-period extension of the model.

Joel Sandonís Díez
University of Alicante

David Jiménez Gómez
University of Alicante

Stephane Caprice
Toulousse School of Economics