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ONLINE – Applied Micro Workshop – Fabian Schmitz, “Consumer Protection or Efficiency? The Case of Partitioned Pricing”

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Simon Dato, Andreas Klümper, and Fabian Schmitz: “Consumer Protection or Efficiency? The Case of Partitioned Pricing” This paper analyzes how regulating partitioned pricing, i.e., the practice to split a good’s price into a headline and an additional price, affects consumer surplus and welfare. With imperfect competition and naive consumers that underestimate intransparent additional prices, a fundamental trade-off between consumer protection and efficiency arises. Full consumer protection maximizes consumer surplus but leads to inefficiently low demand and is therefore never welfare-optimal. However, in markets with an unrestricted headline price, any bound on the additional price increases welfare and consumer surplus compared to an unregulated additional price. In markets with non-negative headline prices, capping additional prices at the firms’ costs is welfare neutral and increases consumer surplus. Moreover, we characterize and study the interplay between the optimal level of price transparency and optimal regulations of additional prices.

Event details
What
  • Presentation
When Jan 22, 2021
from 09:00 to 10:15
Where Zoom URL TBA via mailing list
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