Misperception and Cognition in Markets
We consider a market setting where a consumer holds either a naive or sophisticated perception of their preference over products. We introduce the concept of a cognitive equilibrium, in which the consumer can transition between the cognitive states of naiveté and sophistication depending on the degr...
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| Format: | Article |
| Language: | English |
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MDPI AG
2022-10-01
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| Series: | Games |
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| Online Access: | https://www.mdpi.com/2073-4336/13/6/71 |
| _version_ | 1797458128767287296 |
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| author | Benjamin Young |
| author_facet | Benjamin Young |
| author_sort | Benjamin Young |
| collection | DOAJ |
| description | We consider a market setting where a consumer holds either a naive or sophisticated perception of their preference over products. We introduce the concept of a cognitive equilibrium, in which the consumer can transition between the cognitive states of naiveté and sophistication depending on the degree of exploitation in the market. We compare market outcomes under monopoly and competition. While competition unambiguously improves market outcomes when the consumer’s cognitive state is exogenous, it can strictly lower gains from trade when cognitive states are endogenously determined. |
| first_indexed | 2024-03-09T16:32:36Z |
| format | Article |
| id | doaj.art-b1172127cca64dbc9a2bbe1c18bb0f00 |
| institution | Directory Open Access Journal |
| issn | 2073-4336 |
| language | English |
| last_indexed | 2024-03-09T16:32:36Z |
| publishDate | 2022-10-01 |
| publisher | MDPI AG |
| record_format | Article |
| series | Games |
| spelling | doaj.art-b1172127cca64dbc9a2bbe1c18bb0f002023-11-24T14:59:49ZengMDPI AGGames2073-43362022-10-011367110.3390/g13060071Misperception and Cognition in MarketsBenjamin Young0Economics Discipline Group, UTS Business School, University of Technology Sydney, Sydney 2007, AustraliaWe consider a market setting where a consumer holds either a naive or sophisticated perception of their preference over products. We introduce the concept of a cognitive equilibrium, in which the consumer can transition between the cognitive states of naiveté and sophistication depending on the degree of exploitation in the market. We compare market outcomes under monopoly and competition. While competition unambiguously improves market outcomes when the consumer’s cognitive state is exogenous, it can strictly lower gains from trade when cognitive states are endogenously determined.https://www.mdpi.com/2073-4336/13/6/71naivetésophisticationcognitionmarkets |
| spellingShingle | Benjamin Young Misperception and Cognition in Markets Games naiveté sophistication cognition markets |
| title | Misperception and Cognition in Markets |
| title_full | Misperception and Cognition in Markets |
| title_fullStr | Misperception and Cognition in Markets |
| title_full_unstemmed | Misperception and Cognition in Markets |
| title_short | Misperception and Cognition in Markets |
| title_sort | misperception and cognition in markets |
| topic | naiveté sophistication cognition markets |
| url | https://www.mdpi.com/2073-4336/13/6/71 |
| work_keys_str_mv | AT benjaminyoung misperceptionandcognitioninmarkets |