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Inattentive consumers and product quality.

Abstract:

We present a model in which some consumers shop on the basis of price alone, without paying attention to product quality. A firm may “cheat” and offer a worthless product to exploit these inattentive consumers. In the unique symmetric equilibrium, firms follow a mixed strategy involving both price and quality dispersion. The presence of inattentive consumers harms attentive consumers, and enables firms to earn positive profits. With many sellers, approximately half of them will cheat. A marke...

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Publisher copy:
10.1162/JEEA.2009.7.2-3.411

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Journal:
Journal of the European Economic Association
Volume:
7
Issue:
2-3
Publication date:
2009-01-01
DOI:
URN:
uuid:ea3dac6f-e5d4-47eb-8ee2-5c38d52f3666
Local pid:
oai:economics.ouls.ox.ac.uk:15237
Language:
English

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