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Competition With Limited Attention to Quality Differences
Schmitt, Stefanie Y. (2025): Competition With Limited Attention to Quality Differences, in: Bamberg: Otto-Friedrich-Universität, S. 620–636.
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Publisher Information:
Year of publication:
2025
Pages:
Source/Other editions:
The journal of industrial economics, Oxford: Wiley-Blackwell, 2025, Jg. 73, Nr. 4, S. 620–636, ISSN: 1467-6451, 0022-1821
Year of first publication:
2025
Language:
English
Abstract:
I analyze the implication of consumers' limited attention to quality differences on market outcomes and welfare. I model this limited attention with a perception threshold, that is, consumers only perceive quality differences between goods that exceed their perception threshold. The model allows for equilibria with distinguishable and with indistinguishable qualities. If firms are sufficiently horizontally differentiated, firms produce goods with indistinguishable qualities. Then, limited attention harms consumers and benefits firms. If firms are not sufficiently horizontally differentiated, firms produce goods with distinguishable qualities. Then, limited attention has no effect on consumers' welfare or firms' profits.
Keywords: ; ; ;
limited attention
perception threshold
product differentiation
product quality
Type:
Article
Activation date:
December 12, 2025
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https://fis.uni-bamberg.de/handle/uniba/112129