The Informational Role of Prices
| Autor: | Marc Santugini, Leonard J. Mirman |
|---|---|
| Rok vydání: | 2008 |
| Předmět: |
TheoryofComputation_MISCELLANEOUS
Economics and Econometrics jel:D84 media_common.quotation_subject 05 social sciences jel:D82 jel:D83 jel:D42 Economic surplus jel:D21 Microeconomics jel:L12 Information asymmetry Order (exchange) jel:L15 0502 economics and business Economics ComputingMilieux_COMPUTERSANDSOCIETY Quality (business) Asymmetric information Dominant Firm with Fringe Competition Informational externality Learning Quality Signaling 050207 economics Monopoly Welfare 050205 econometrics media_common |
| Popis: | We study the informational role of prices. To that end, we consider the framework of a dominant firm with a competitive fringe. When the competitive fringe is large enough, there exists a unique fully revealing equilibrium, in which the price conveys full information about the quality of the good to uninformed buyers. Deceiving the uninformed buyers by charging a high price and mimicking a high quality is not profitable when the competitive fringe is large enough. Since a higher price triggers more sales on the part of the competitive fringe, residual demand and thus profits are reduced. We also study the effect of asymmetric information and learning on the equilibrium outcomes. More uninformed buyers increases the price, reduces the quantity sold by the dominant firm, but increases the quantity sold by the competitive fringe. |
| Databáze: | OpenAIRE |
| Externí odkaz: |
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