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Does Product Complexity Matter for Competition in Experimental Markets?

Author

Listed:
  • Stefania Sitzia

    (School of Economics, University of East Anglia)

  • Daniel John Zizzo

    (Centre for Competition Policy and School of Economics, University of East Anglia)

Abstract
We describe a first experiment on whether product complexity affects competition and consumers in retail markets. We are unable to detect a significant effect of product complexity on prices, except insofar as the demand elasticity for complex products is higher. However, there is qualified evidence that complex products have the potential to induce consumers to buy more than they would otherwise. In this sense, consumer exploitability in quantities cannot be ruled out. We also find evidence for shaping effects: consumers' preferences are shaped by past experience with prices, and firms may in principle exploit this to sell more.

Suggested Citation

  • Stefania Sitzia & Daniel John Zizzo, 2008. "Does Product Complexity Matter for Competition in Experimental Markets?," Working Paper series, University of East Anglia, Centre for Competition Policy (CCP) 2008-33, Centre for Competition Policy, University of East Anglia, Norwich, UK..
    • Handle: RePEc:uea:ueaccp:2008_33
    as

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    References listed on IDEAS

    as
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    More about this item

    Keywords

    consumer market; product complexity; complexity aversion; complexity exploitation; bounded rationality;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

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