Misperception and Cognition in Markets

Young, B

Misperception and Cognition in Markets

Young, B

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Publisher:: MDPI AG
Publication Type:: Journal Article
Citation:: Games, 2022, 13, (6), pp. 1-15
Issue Date:: 2022-12-01

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Field	Value	Language
dc.contributor.author	Young, B https://orcid.org/0000-0002-5166-7046
dc.date.accessioned	2023-07-03T03:46:50Z
dc.date.available	2023-07-03T03:46:50Z
dc.date.issued	2022-12-01
dc.identifier.citation	Games, 2022, 13, (6), pp. 1-15
dc.identifier.issn	2073-4336
dc.identifier.issn	2073-4336
dc.identifier.uri	http://hdl.handle.net/10453/171138
dc.description.abstract	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.
dc.language	en
dc.publisher	MDPI AG
dc.relation.ispartof	Games
dc.relation.isbasedon	10.3390/g13060071
dc.rights	info:eu-repo/semantics/openAccess
dc.subject	0102 Applied Mathematics, 1401 Economic Theory, 1701 Psychology
dc.title	Misperception and Cognition in Markets
dc.type	Journal Article
utslib.citation.volume	13
utslib.for	0102 Applied Mathematics
utslib.for	1401 Economic Theory
utslib.for	1701 Psychology
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
pubs.organisational-group	/University of Technology Sydney/Faculty of Business/Economics Discipline
utslib.copyright.status	open_access	*
pubs.consider-herdc	false
dc.date.updated	2023-07-03T03:46:49Z
pubs.issue	6
pubs.publication-status	Published
pubs.volume	13
utslib.citation.issue	6

Abstract:

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.

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http://hdl.handle.net/10453/171138