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Spurious complexity and commonstandards in markets for consumergoods
Alexia GaudeulandRobert Sugden
EARIE 2008Toulouse, September 4-6, 2008
 
Outline of the presentation
Spurious complexity and libertarian paternalism
Some examples for illustration.
A model of consumer choice.
Individuated standard and common standard.
Dynamics: towards a common standard.
Conclusion.
 
Spurious complexity
In industrial organisation: investigation of whether firmscan exploit consumers’cognitive limitations by addingspurious complexity to tariff structures (e.g. Ellison andEllison, 2004; Ellison, 2005; Gabaixand Laibson, 2006;Spiegler, 2006).
Typical conclusion: firms do have incentives to do this;results make markets less competitive.In some markets (e.g. domestic supply of electricity and gasin UK), competing suppliers sell exactly the same product,competing only on price.Yet tariffs are quite complex and consumers often fail tochoose the lowest-cost supplier [Chris Wilson and CatherineWaddams, ‘Do consumers switch to the best suppliers?’,CCP, 2006].
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