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American Economic Journal: Microeconomics: Vol. 5 No. 1 (February 2013)

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Competition and the Use of Foggy Pricing

Article Citation

Miravete, Eugenio J. 2013. "Competition and the Use of Foggy Pricing." American Economic Journal: Microeconomics, 5(1): 194-216.

DOI: 10.1257/mic.5.1.194

Abstract

Firms engage in foggy pricing when the menu of tariff options aims at profiting from consumer mistakes. The analysis of this paper concludes that the transition from monopoly to competition in the early US cellular telephone industry does not generally foster the use of such deceptive strategies. I offer three alternative measures to account for the fogginess of the menu of options offered by cellular carriers. All results are robust to the existence of uncertainty regarding future consumption at the time of choosing a particular tariff option, as well as to consumers' heterogeneity with respect to cellular telephone usage. (JEL D03, L11, L12, L13, L96)

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Authors

Miravete, Eugenio J. (U TX)

JEL Classifications

D03: Behavioral Economics: Underlying Principles
L11: Production, Pricing, and Market Structure; Size Distribution of Firms
L12: Monopoly; Monopolization Strategies
L13: Oligopoly and Other Imperfect Markets
L96: Telecommunications

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