Consumer Naivete and Competitive Add-on pricing on platforms

MPRA Paper from University Library of Munich, Germany

Abstract: Two sellers trade vertically and horizontally differentiated goods on a platform which charges them a commission fee. Some consumers are naive and do not observe, or consider, add-on prices until after they commit to buying the base good from a seller. We address the following questions. First, how do consumer naivete and costs asymmetries (arising from differences in fees) influence pricing strategies. Second, we examine the welfare loss arising from sub-optimal decisions made by naive consumers who buy the bundle, but fail to factor in its total price at the outset. Third, how does naivete affect seller and platform payoffs.

Keywords: add-on pricing; consumer naivete; cost asymmetry; horizontal differentiation; vertical differentiation; platform fee; cost pass-through (search for similar items in EconPapers)
JEL-codes: L1 L11 (search for similar items in EconPapers)
Date: 2022-06-01
New Economics Papers: this item is included in nep-com, nep-cta, nep-ind, nep-mic, nep-pay and nep-reg
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Related works:
Working Paper: Consumer naivete and competitive add-on pricing on platforms (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:113548

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