Obfuscation and Rational Inattention in Digitalized Markets
نویسندگان
چکیده
This paper studies the behavior of competing firms in a duopoly with rational inattentive consumers. Firms play sequential game which they decide to obfuscate their individual prices before on price. Probabilistic demand functions are endogenously determined by consumers’ optimal information strategy, depends firms’ obfuscation choice and unrestricted prior beliefs. We show that may result an equilibrium high where both transparency low no obfuscation, providing argument for market regulation. Lower costs asymmetric beliefs about reduce probability equilibrium. Using data Sweden, we document decrease price complexity corresponding mobile phone subscriptions last two decades. Our model rationalizes these changes explains why persist some but not all digitalized markets.
منابع مشابه
Signal Extraction and Rational Inattention∗
In this paper we examine the implications of two theories of informational frictions, signal extraction (SE) and rational inattention (RI), for optimal decisions and economic dynamics within the linear-quadratic-Gaussian (LQG) setting. We first show that if the variance of the noise and channel capacity are fixed exogenously in the SE and RI problems, respectively, the two environments lead to ...
متن کاملCoordination with Rational Inattention
We study information acquisition in a coordination game with incomplete information. To capture the idea that players can exibly decide what information to acquire, we do not impose any physical restriction on feasible information structure. Facing an informational cost measured by reduction of Shannon's entropy, players collect information most relevant to their welfare and are rationally inat...
متن کاملRational Inattention and Aggregate Fluctuations
This paper introduces the rational inattention hypothesis (RI) – that agents process information subject to finite channel constraints – into a stochastic growth model with permanent technology shocks. We find that RI raises consumption volatility relative to output by introducing an endogenous demand shock. Furthermore, it is shown that incorporating RI can provide an additional internal propa...
متن کاملAn Introduction to Rational Inattention
• Another alternative – and this is the one that rational inattention chooses – is to model agents as having only a probability distribution over the true state of the world, instead of knowing the state of the world with certainty. For instance, imagine looking at a thermometer or yourwatch:While being – inmost cases, at least – highly correlated with the actual temperature or time, respective...
متن کاملRational inattention in dynamic adverse selection
I analyze a market with asymmetric information, interdependent values, multiple trading opportunities and trade frictions. The frictions can be reduced at a cost, e.g. by increasing attention, search or computing power. Raising the difference between the values of buyers and sellers can delay trade, despite the greater gains from trade. Rejecting an initial offer is a stronger signal when the o...
متن کاملذخیره در منابع من
با ذخیره ی این منبع در منابع من، دسترسی به آن را برای استفاده های بعدی آسان تر کنید
ژورنال
عنوان ژورنال: Social Science Research Network
سال: 2021
ISSN: ['1556-5068']
DOI: https://doi.org/10.2139/ssrn.3779853