This paper presents a model in which a firm attempts to gain market power by pricing above the competitive market price and simply trying to persuade ill-informed consumers not to search for other lower priced firms. Fictitious price comparisons, or false sale signs could be used in this way to...

Within a one-shot, duopoly game, we show that firms cannot use false in-store price comparisons to deter rational consumers from further beneficial price search in an effort to create market power. However, by introducing a consumer protection authority that monitors price comparisons, we...