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Does product complexity matter for competition in experimental retail markets?

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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.

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Authors and Affiliations

  1. School of Economics, University of East Anglia, Norwich, UK

    Stefania Sitzia

  2. School of Economics and ESRC Centre for Competition Policy, School of Economics, University of East Anglia, Norwich, UK

    Daniel John Zizzo

Authors
  1. Stefania Sitzia
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  2. Daniel John Zizzo
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Correspondence to Daniel John Zizzo.

Additional information

The experimental instructions can be found as an online appendix at: http://www.uea.ac.uk/~ec601/PrCInstrApp.pdf.

Electronic Supplementary Material

The Below is the Electronic Supplementary Material.

ESM 1 (DOC 97.5 kb)

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Sitzia, S., Zizzo, D.J. Does product complexity matter for competition in experimental retail markets?. Theory Decis 70, 65–82 (2011). https://doi.org/10.1007/s11238-009-9163-1

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  • DOI: https://doi.org/10.1007/s11238-009-9163-1

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