Visually-Impaired Version 
Research Seminar with Dr. Binur Yermukanova. Тopic: “Consumer Myopia and Experience”
This event is organized in collaboration with our colleagues at MIND.
April 9, 2025
Abstract: The presence of consumer myopia in add-on markets allows firms to exploit consumers who have limited information about the market, even in competitive ones. In this paper, we study the effect of consumer learning on shrouding (hiding) and pricing strategies of the firms in add-on markets. We formally develop a dynamic theoretical model of add-on markets where consumers learn about the shrouding strategies of firms after they buy and experience expensive add-on products in a previous period. Despite high levels of consumer myopia, we find that firms choose to unshroud the add-on product and sell it at a low price as long as consumer experience is high enough in the market. We also find co-existence of shrouding and unshrouding equilibria with high add-on prices when the level of consumer experience is low enough and the level of consumer myopia is high enough in the market. Our results combine the contrasting results in the literature for add-on markets, and are robust to an infinite-period extension of the model.
