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Theory and Decision

, Volume 70, Issue 1, pp 65–82 | Cite as

Does product complexity matter for competition in experimental retail markets?

  • Stefania Sitzia
  • Daniel John Zizzo
Article

Abstract

We describe a first experiment on whether product complexity affects competition and consumers in retail markets. We are unable to detect a significant effect of product complexity on prices, except insofar as the demand elasticity for complex products is higher. However, there is qualified evidence that complex products have the potential to induce consumers to buy more than they would otherwise. In this sense, consumer exploitability in quantities cannot be ruled out. We also find evidence for shaping effects: consumers’ preferences are shaped by past experience with prices, and firms may in principle exploit this to sell more.

Keywords

Consumer market Product complexity Complexity aversion Complexity exploitation Bounded rationality 

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Copyright information

© Springer Science+Business Media, LLC. 2009

Authors and Affiliations

  1. 1.School of EconomicsUniversity of East AngliaNorwichUK
  2. 2.School of Economics and ESRC Centre for Competition Policy, School of EconomicsUniversity of East AngliaNorwichUK

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