Does "Bait and Switch" really benefit consumers? Advancing the discussion
We applaud the advances in this colloquy and the areas of convergence that are emerging. However, this reply points out that the purported benefits of "bait and switch" found in Hess and Gerstner (1998) are predicated upon (i) only a single component (availability) within the broader domain of bait and switch; (ii) the assumption that one of the parameters in the consumer utility function differs with the availability of advertised brands; and (iii) a further assumption that no other parameters in the model will change when the availability condition changes. After assessing these developments, we conclude that i) the legal status of bait-and-switch schemes is fine as it stands; ii) when understood in their true complexity, parameters in the consumer utility functions likely will not differ with regard to availability, thus obviating the finding of increased consumer welfare; and iii) even if it is believed that utility functions would differ, effects on other model parameters clearly suggest that consumers will be worse off with bait and switch. Despite these differences, however, we are pleased with the developments the dialogue has produced.
Wilkie, WL; Mela, CF; Gundlach, GT
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