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Do firms strategically confuse their customers? Using a detailed dataset covering virtually all mobile phone tariffs and their handsets in the UK between January 2010 and September 2012, we examine the co-evolution of prices with the differentiation and overlap of operators' product portfolios. Incorporating the fact that mobile tariffs are multidimensional and hard to compare but easy to imitate and cheap to launch, we argue that firms introduced a large number of dominated tariffs as an obfuscation strategy. We show that the increase in dominated tariffs correlates with the increase in average prices despite converging product portfolios. This exploratory study is one of the first to offer suggestive evidence of the existence and role of obfuscation as a firm strategy.
With the participation of Ambre Nicolle (CREST-ENSAI), Tobias Kretschmer (LMU Munich) and Christos Genakos (Cambridge Business School)
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