EXCESSIVE COMPETITION ON HEADLINE PRICES

In a variety of purchasing situations, consumers may focus primarily on headline prices, disregarding the full costs associated with acquiring and maintaining product or service contract. Even when this is case, literature has delineated various circumstances where intense competition can protect through so-called “waterbed effect.” article, we however show that have context-dependent preferences, rather exacerbate their society's harm by distorting choice provision. Then, consumer protection policy must sufficiently constrain hidden fees so competition, along high-quality firms' incentives to educate consumers, restore efficiency.