Whom to inform about prices? Evidence from the German gasoline market


When is informing consumers about prices most effective at increasing competition? We combine a theoretical model of imperfect information with empirical evidence to show how the effect of informing consumers about prices depends on how well informed they are ex ante. Theoretically, an increase in consumer information decreases prices more the fewer ex ante informed consumers there are. Empirically, we study the introduction of mandatory price disclosure in the German fuel market separately for two fuel types that differ in how informed consumers are ex ante. For each fuel type, we use a difference-in-differences design and the universe of station-level prices in Germany and France. In line with the theory, the decline in prices was stronger for fuel type with ex ante less informed consumers. We also show that the treatment effect declines over time and is intensified by local follow-on information campaigns.

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