This paper studies unshrouding decisions in a framework similar to Gabaix and Laibson (2006), but considers an alternative unshrouding mechanism where the impact of advertising add-on information depends on the number of unshrouding firms. We show that shrouding becomes less prevalent as the number of competing firms increases. With unshrouding costs a non-monotonic relationship between the number of firms and unshrouding may arise.
- Add-on pricing
- Bounded rationality
ASJC Scopus subject areas
- Organizational Behavior and Human Resource Management
- Economics and Econometrics