Competition and the Use of Foggy Pricing | Zendy

Eugenio J. Miravete | Zendy

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Competition and the Use of Foggy Pricing

Author(s) -

Eugenio J. Miravete

Publication year - 2013

Publication title -

american economic journal microeconomics

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 5.339

H-Index - 40

eISSN - 1945-7685

pISSN - 1945-7669

DOI - 10.1257/mic.5.1.194

Subject(s) - tariff , monopoly , competition (biology) , consumption (sociology) , economics , industrial organization , microeconomics , business , pricing strategies , international economics , ecology , social science , sociology , biology

Firms engage in foggy pricing when the menu of tariff options aims at profiting from consumer mistakes. The analysis of this paper concludes that the transition from monopoly to competition in the early U.S. cellular telephone industry does not foster the use of such deceptive strategies. I offer three possible measures to account for the fogginess of the menu of options offered by cellular carriers. All results are robust to the existence of uncertainty regarding future consumption at the time of choosing a particular tariff option, as well as to consumers' heterogeneity with respect to cellular telephone usage

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