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Countervailing Power and Price Transparency

Author

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  • Morten Hviid
  • H. Peter Møllgaard

Abstract

We investigate whether improved transparency about prices may increase the countervailing power exercised by buyers of an intermediate good. In a model with an informed manufacturer that sells to both informed and uninformed firms, we show that full transparency cannot be part of equilibrium due to the strategic effect of the resulting informational spillover. Transparency policies introduce a distortion for informed segments and are unsuccessful in completely removing the distortion from the uninformed segment. Welfare effects are hence ambiguous and depend on the weight assigned to uninformed markets. Our results thus cast further doubt on the value of transparency.

Suggested Citation

  • Morten Hviid & H. Peter Møllgaard, 2006. "Countervailing Power and Price Transparency," Scandinavian Journal of Economics, Wiley Blackwell, vol. 108(3), pages 499-512, October.
    • Handle: RePEc:bla:scandj:v:108:y:2006:i:3:p:499-512
    DOI: 10.1111/j.1467-9442.2006.00468.x
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    Cited by:

    1. Yiquan Gu & Tobias Wenzel, 2017. "Consumer confusion, obfuscation and price regulation," Scottish Journal of Political Economy, Scottish Economic Society, vol. 64(2), pages 169-190, May.

    More about this item

    JEL classification:

    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General

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