Does Product Complexity Matter for Competition in Experimental Retail Markets?

25 Pages Posted: 27 Nov 2008

See all articles by Daniel John Zizzo

Daniel John Zizzo

University of Queensland - School of Economics

Stefania Sitzia

University of East Anglia

Date Written: November 26, 2008

Abstract

We describe a first experiment on whether product complexity affects competition and consumers in retail markets. We are unable to detect a systematic 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

JEL Classification: C91, D12, D21, L15

Suggested Citation

Zizzo, Daniel John and Sitzia, Stefania, Does Product Complexity Matter for Competition in Experimental Retail Markets? (November 26, 2008). Available at SSRN: https://ssrn.com/abstract=1307614 or http://dx.doi.org/10.2139/ssrn.1307614

Daniel John Zizzo (Contact Author)

University of Queensland - School of Economics ( email )

St Lucia
Brisbane, Queensland 4072
Australia

Stefania Sitzia

University of East Anglia ( email )

Norwich, Norfolk NR4 7TJ
United Kingdom

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