Consumers overlook quality in price wars, leading to lower efficiency.
The article explores how price competition affects markets for experience goods with sellers building reputations for quality. Comparing price competition to monopolies and fixed prices, the study shows that in price competition, consumers focus less on quality reputation, leading to lower efficiency. This supports the idea that consumers may prioritize certain product aspects in complex markets. Additionally, when regulated prices are too low, consumers pay less attention to quality, resulting in lower provided quality.