Suchergebnisse

We provide a novel intuition for the observation that many brand manufacturers have restricted their retailers' ability to resell brand products online. Our approach builds on models of salience according to which price disparities across distribution channels guide a consumer's attention toward prices and lower her appreciation for quality. Thus, absent vertical restraints, one out of two distortions – a quality or a participation distortion – can arise in equilibrium. The quality distortion occurs if the manufacturer provides either an inefficiently low quality under price salience or an inefficiently high quality in order to prevent price salience. The participation distortion arises as offline sales might be entirely abandoned in order to prevent prices from becoming salient. Both distortions are ruled out if vertical restraints are imposed. As opposed to the current EU legislation that considers a range of vertical restraints as being hardcore restrictions of competition, we show that these constraints can be socially desirable if salience effects are taken into account.

We provide a novel intuition for the observation that many brand manufacturers have restricted their retailers' ability to resell brand products online. Our approach builds on models of salience according to which price disparities across distribution channels guide a consumer's attention toward prices and lower her appreciation for quality. Thus, absent vertical restraints, one out of two distortions - a quality or a participation distortion - can arise in equilibrium. The quality distortion occurs if the manufacturer provides either an inefficiently low quality under price salience or an inefficiently high quality in order to prevent price salience. The participation distortion arises as offline sales might be entirely abandoned in order to prevent prices from becoming salient. Both distortions are ruled out if vertical restraints are imposed. As opposed to the current EU legislation that considers a range of vertical restraints as being hardcore restrictions of competition per se, we show that these constraints can be socially desirable if salience effects are taken into account.

Abstract
Online intermediaries with information about a consumer's tendencies often 'steer' her toward products she is more likely to purchase. We analyse the welfare implications of this practice for 'fallible' consumers, who make statistical and strategic mistakes in evaluating offers. The welfare effects depend on the nature and quality of the intermediary's information and on properties of the consumer's mistakes. In particular, steering based on high-quality information about the consumer's mistakes is typically harmful, sometimes extremely so. We argue that much real-life steering is of this type, raising the scope for a broader regulation of steering practices.