Abstract
Policymakers are increasingly turning to regulation to reduce hidden or non-salient fees. Yet the overall consumer benefits from these polices are uncertain because firms may increase other prices to offset lost fee revenue. We show that the extent to which firms offset reduced hidden fee revenue is determined by a simple equation that combines two “sufficient statistics,” which can be estimated or calibrated in a wide range of settings: (i) a parameter that captures the degree of market competitiveness and (ii) a parameter that captures the salience of the hidden fee. We provide corroborating evidence for this approach by drawing upon evidence on the effect of fee regulation under the 2009 CARD Act. We also illustrate the applicability of our approach by using the framework to assess a hypothetical regulation of airline baggage fees.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
