Firm-specific information, product differentiation, and industry equilibrium

Where consumers have imperfect information about specific firms’ prices and lack information about the market, firms have informational market power. In general, improving the consumer’s information about each firm’s price will not necessarily lower average market price. We show, however, that certain types of improvements will lower price. Moreover, a reduction in barriers to entry (e.g., capital costs) will lower price-holding information constant. Where a significant number (but not all) consumers have perfect information, single-price equilibria are impossible.


Issue Date:
1985-03
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/47003
Total Pages:
37
Series Statement:
CUDARE Working Paper
154R




 Record created 2017-04-01, last modified 2017-08-25

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