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Information externalities in a model of sales

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  • Martin Sefton

    ()
    (School of Economics, University of Nottingham)

  • John Morgan

    ()
    (Woodrow Wilson School, Princeton University)

Abstract

We anlayze Varian's (1980) Model of Sales, and show that when the number of uninformed consumers increases, prices become less competitive for all consumers. Thus, the influx of uninformed consumers generates a negative externality increasing the prices paid by informed consumers.

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Bibliographic Info

Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 4 (2001)
Issue (Month): 7 ()
Pages: 1-5

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Handle: RePEc:ebl:ecbull:eb-01d00003

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  1. Ekkehard Kessner & Mattias K. Polborn, 2000. "A New Test of Price Dispersion," German Economic Review, Verein für Socialpolitik, Verein für Socialpolitik, vol. 1(2), pages 221-240, 05.
  2. Burdett, Kenneth & Judd, Kenneth L, 1983. "Equilibrium Price Dispersion," Econometrica, Econometric Society, Econometric Society, vol. 51(4), pages 955-69, July.
  3. Michael R. Baye & John Morgan, 2001. "Information Gatekeepers on the Internet and the Competitiveness of Homogeneous Product Markets," American Economic Review, American Economic Association, American Economic Association, vol. 91(3), pages 454-474, June.
  4. Varian, Hal R, 1980. "A Model of Sales," American Economic Review, American Economic Association, American Economic Association, vol. 70(4), pages 651-59, September.
  5. Dennis C. Mueller & B. Burcin Yurtoglu, 2000. "Country Legal Environments and Corporate Investment Performance," German Economic Review, Verein für Socialpolitik, Verein für Socialpolitik, vol. 1(2), pages 187-220, 05.
  6. Michael R. Baye & John Morgan & Patrick Scholten, 2004. "Price Dispersion In The Small And In The Large: Evidence From An Internet Price Comparison Site," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 52(4), pages 463-496, December.
  7. Villas-Boas, J Miguel, 1995. "Models of Competitive Price Promotions: Some Empirical Evidence from the Coffee and Saltine Crackers Markets," Journal of Economics & Management Strategy, Wiley Blackwell, Wiley Blackwell, vol. 4(1), pages 85-107, Spring.
  8. Morgan, John & Orzen, Henrik & Sefton, Martin, 2006. "An experimental study of price dispersion," Games and Economic Behavior, Elsevier, Elsevier, vol. 54(1), pages 134-158, January.
  9. Maarten C.W. Janssen & Jose Luis Moraga, 2000. "Pricing, Consumer Search and the Size of Internet Markets," Tinbergen Institute Discussion Papers, Tinbergen Institute 00-042/1, Tinbergen Institute.
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Cited by:
  1. Il-Horn Hann & Kai-Lung Hui & Sang-Yong Tom Lee & Ivan P.L. Png, 2005. "Sales and Promotions: A More General Model," Industrial Organization, EconWPA 0508014, EconWPA.
  2. Bernd Jost, 2012. "Price Dispersion, Search Costs and Spatial Competition: Evidence from the Austrian Retail Gasoline Market," NEURUS papers neurusp166, NEURUS - Network of European and US Regional and Urban Studies.

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