Consumer Myopia, Standardization and Aftermarket Monopolization

Consumer Inattention and Bill-Shock Regulation

“…I abstract from heterogeneity in sophistication and the resulting cross-subsidization to focus on heterogeneity in add-on demand and the interaction between inattention and bias. Miao (2010) and Heidhues et al (2012) show that profits from aftermarket sales are not necessarily competed away in primary market competition because firms cannot set negative prices for primary goods. 9 Requiring total prices be nonnegative (the no-free-lunch constraint), I also find that biased beliefs soften price competition.…”

Shrouded Attributes and Information Suppression: Evidence from the Field*

“…However, shrouding may be optimal with boundedly rational consumers (Spiegler 2006). Add-ons may be shrouded in equilibrium when consumers are myopic (Gabaix and Laibson 2006;Miao 2006), lack self-control (DellaVigna and Malmendier 2004), or vary in their tastes for the add-on and advertising add-on prices is expensive (Ellison 2005). Moreover, there is no incentive for firms to educate consumers about competitors' shrouded add-ons (Gabaix and Laibson 2006).…”

Competing for Consumers with Self‐Control Problems

“…I conjecture that if I were to introduce a different dimension of consumer heterogeneity, the perfectly competitive limit of my model would be in line with the results of these two papers, assuming that there exists an equilibrium in that region such that the fact that consumers are behavioral matters. Miao () examines consumers with self‐control problems when perfectly competitive firms sell products with aftermarket services (i.e., printers and cartridges), and finds that firms are able to earn positive profits despite perfect competition. Morita and Waldman () examine a monopolist in the same context.…”