Every shroud has a silver lining: The visible benefits of hidden surcharges

Opportunities for shrouded pricing drive down upfront price as firms compete to capture new customers. Unless the surcharge is sufficiently high, consumers are worse off if the practice is banned, assuming Cournot–Nash equilibrium and isoelastic demand. ► This paper shows that shrouded pricing (hidd...

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Bibliographic Details
Published inEconomics letters Vol. 116; no. 2; pp. 151 - 153
Main Authors de Meza, David, Reyniers, Diane
Format Journal Article
LanguageEnglish
Published Amsterdam Elsevier B.V 01.08.2012
Elsevier Science Ltd
Subjects
Competitive firms
Consumer protection
Demand
Economic equilibrium
Economic theory
Elasticity of demand
Game theory
Pricing
Pricing policies
Shrouded prices
Studies
Surcharges
Waterbedding
Waterbedding
D40
Consumer protection
Shrouded prices
D60
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Summary:Opportunities for shrouded pricing drive down upfront price as firms compete to capture new customers. Unless the surcharge is sufficiently high, consumers are worse off if the practice is banned, assuming Cournot–Nash equilibrium and isoelastic demand. ► This paper shows that shrouded pricing (hidden surcharging) decreases the upfront price. ► In a Cournot–Nash equilibrium and assuming isoelastic demand, the upfront price falls by more than the surcharge. ► Consumers may be substantially worse off if shrouding is banned.
Bibliography:ObjectType-Article-2
SourceType-Scholarly Journals-1
ObjectType-Feature-1
content type line 23
ISSN:0165-1765
1873-7374
DOI:10.1016/j.econlet.2012.02.027