Consumers are More Important than Some Think

This paper adds to the literature that studies the effects of improvements in consumer skills on the degree of vendor competition. Historically, competitive models have largely taken consumer skills for granted, along with consumer self-interest, in the gathering, processing, and evaluation of raw information. Self-interest was expected to be sufficient for reaching optimal decisions. But we study the likely effect improved consumer skill levels can have upon intensity of competition, leading to the conclusion that the more skillful consumers are in performing their buying function, the lower vendor prices will tend to be; just as an overall increase in producer costs puts an upward pressure on prices. Of equal importance, is the higher likelihood that competition will be maintained. This not only leads to potential benefits for all consumers, both skilled and unskilled, it suggests opportunities for public policy to improve consumer skills at the elementary-secondary school level, which lead to social benefits.