Competition Over Agents with Boundedly Rational Expectations

A market model is presented, in which firms and consumers differ in their market understanding. In the model, rational firms compete in probability distributions over consumers with bounded ability to grasp statistical data. Increased competition causes firms to increase their effort to obfuscate, instead of increasing their effort to be more competitive. As a result, consumer welfare is not enhanced, and may even deteriorate, while industry profits do not diminish