Dumitrescu, Ariadna; Gil-Bazo, Javier - Barcelona Graduate School of Economics (Barcelona GSE) - 2015
We build a model of mutual fund competition in which a fraction of investors ("unsophisticated") exhibit a preference … engage in competition for sophisticated investors either, and choose instead, to cater to unsophisticated investors. If … familiarity bias is high enough, bad funds survive competition from higher quality funds despite offering lower after …