Neues BERG Working Paper No. 184 von Stefanie Y. Schmitt erschienen

In der BERG Working Paper Series 184 wurde von Stefanie Y. Schmitt ein neues Papier mit dem Titel "Competition with limited attention to quality differences" ver?ffentlicht.

Eine Gesamtübersicht aller bisher erschienenen BERG Working Paper finden Sie hier.

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Abstract:

I analyze the implication of consumers’ limited attention to quality differences on market outcomes and welfare. I model this limited attention to quality differences with a perception threshold: Consumers only perceive quality differences between goods that exceed the consumers’ perception threshold. The model allows for two types of equilibria: equilibria with distinguishable and equilibria with indistinguish- able qualities. I show that horizontal product differentiation, which gives firms market power, affects equilibrium selection. If firms are horizontally differentiated, firms produce goods with indistinguishable qualities. Then, limited attention harms consumers and benefits firms. In contrast, if firms are not horizontally differentiated, firms produce goods with distinguishable qualities. Then, limited attention has no effect on consumers’ welfare or firms’ profits.