Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments December 11, 2022 erstellt
Description:
Two sellers with differentiated products compete and coordinate in a market by setting price frames first in Stage 1 and price levels later in Stage 2. A consumer's purchase decision depends not only on the difference of the net values, but also on the difference of the price frames. An increase in frame difference strengthens the obfuscation and yields two effects: the increase of market power and the equalization of market shares. The two effects are in the same direction for the weaker seller, while opposite for the stronger seller, which leads to the potential tension in the choice of price frame. We show that the former effect is dominated by the latter when the frame difference is small relative to the quality difference, and the former becomes dominant when the frame difference is relatively large. Therefore, the weaker seller's profit is monotone in frame difference, while the relationship exhibits a "U''-shape pattern for the stronger seller. The equilibrium play is characterized as follows. In Stage 2, given firms' price frame decisions, there exists a unique pure strategy pricing equilibrium that is monotone in quality. In Stage 1, there always exists a trivial hide-and-seek framing equilibrium in which firms' price frames are uniformly distributed over the ring structure of the frame space; Furthermore, if and only if the effect of frame difference on consumer decision exceeds a threshold, there exists a seller-optimal framing equilibrium in which the frame difference is maximized and so does the consumer obfuscation. Our study contributes to the growing literature on price format, price dispersion, strategic obfuscation, and consumer protection