A search cost model of obfuscation

Authors


  • This article was supported by NSF grant SES-0550897 and the Toulouse Network for Information Technology. The second author also received support through a NSF Graduate Research Fellowship.

Abstract

This article develops models in which obfuscation is individually rational for oligopolistic firms. Firms sell a homogeneous good to rational consumers who incur search costs to learn prices. Search costs are endogenized by allowing obfuscation—firms have an unobservable action that increases the time needed to learn their price. One model involves search costs convex in shopping time. We show that slight convexity can dramatically alter the equilibrium price distribution. A second model examines an informational linkage between current and future search costs: consumers are uncertain about a component of search costs. Here, a signal-jamming mechanism can lead to equilibrium obfuscation.

Ancillary