osewalrus (osewalrus) wrote,
osewalrus
osewalrus

Another Free Market Myth Bites The Dust

Turns out even if you assume both costless advertising and perfect competition, you will not get full disclosure of "shrouded product attributes" (hidden fees, high maintenance costs, or other factors that exploit consumer ignorance to drive up cost). Turns out it is too profitable to bias behavior and too difficult for non-exploitative firms to capture customers from the exploiting firms.
http://www.aeaweb.org/annual_mtg_papers/2005/0109_0800_1103.pdf

I don't expect this to alter the belief set of true believers, mind. Who needs truth in billing rules when the market can take care of it for us? And, of course, the more complex the transaction, the greater the opportunity to shroud attributes.
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