Obfuscation in competitive markets

Abstract

In many markets, firms make their products complex through add-on features, thus making them difficult to evaluate and compare. Does this product obfuscation lure buyers into buying overpriced products, and if so, why does competition not eliminate this practice? More generally, under which conditions can sellers enforce stable obfuscation levels in a competitive environment such that they can increase their profits at the buyers’ expense? We show – based on competitive experimental markets – that add-ons that merely complicate the pr Show more