>There is a subtler problem too, explored a few years ago by the economists Xavier Gabaix and David Laibson. Even if an advert proclaiming “no hidden charges” is credible, it is not necessarily profitable. The problem is that not all customers would find the promise appealing. Some would instead infer “if you are good at avoiding hidden charges, try one of our competitors, who will offer you a cheap deal in the vain hope of ripping you off”. The transparent company would attract the suckers without exploiting them; the sneaky company would be a magnet for the sophisticates, who might well then avoid the tricks. The advertisement would backfire.

Without some experiments backing this up, this argument sounds contrived and perhaps overthought.

I seriously doubt there are that many "sophisticates" who factor that into their decision, even less so, sophisticates who would consciously go for the "hidden charges" business with the idea that their savviness would help them avoid the charges.

In any case, the fix is simple: regulating hidden charges away with business destroying penalties.

If the rental companies face a law that they should make all charges known in advance of be shut down, they'll change their tune in unison, and there would be no "hidden charge" competitor advantage...