Strategic Pricing with Rational Inattention to Quality

Research output: Working paper

Abstract

Using a standard strategic pricing game, I show that when consumers are 'rationally inattentive' to product quality, the equilibrium pricing strategies of firms depend on the attentional costs of consumers. I first characterize the most informative equilibrium for all possible costs of attention. I then demonstrate that in the most informative equilibrium, a drop in the costs of attention can actually result in less
informative prices.
Original languageEnglish (US)
Number of pages19
StatePublished - Dec 10 2015

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