Browsing versus Studying: A Pro-Market Case for Regulation
We identify a novel competition-policy-based argument for regulating the secondary features of complex or complexly-priced products when consumers have limited attention and therefore face a tradeoff between superficially understanding more products (browsing) and fully understanding fewer products (studying). Interventions limiting ex-post consumer harm through safety regulations, a strict liability regime, an unfair contract terms principle, or other methods free consumers from worrying about the regulated features, enabling them to do more browsing and thereby enhancing competition. We show that for a pro-competitive effect to obtain, the regulation must apply to the secondary features, and not to the total price or value of the product, and it might have to be broad in scope. Furthermore, the benefits of regulating some markets may manifest themselves in other markets. As an auxiliary positive prediction, we establish that because low-value consumers are often more likely to study than high-value consumers, the average price consumers pay can be increasing in the share of low-value consumers. This prediction helps explain why a number of essential products are more expensive in lower-income neighborhoods.

Link to paper below:
www.personal.ceu.hu/staff/Botond_Koszegi/browsing.pdf
Date: 13 June 2019, 13:00 (Thursday, 7th week, Trinity 2019)
Venue: Manor Road Building, Manor Road OX1 3UQ
Venue Details: Seminar Room C
Speaker: Johannes Johnen (Université catholique de Louvain)
Organising department: Department of Economics
Part of: Department of Economics Seminar
Booking required?: Not required
Audience: Members of the University only
Editor: Melis Clark