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Quality over-provision of information goods

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Author Info
Xiaopeng Xu () (University of California-Berkeley)
Abstract

This paper studies a producer's quality choice of an information good. The marginal cost of quality provision for the good is decreasing. The buyer does not observe the actual quality but can learn a signal which is the sum of quality and a noise. It shows that the producer has an incentive to over-supply quality. Moreover, and interestly, all types of producer may over-supply quality.

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Publisher Info
Article provided by Economics Bulletin in its journal Economics Bulletin.

Volume (Year): 12 (2002)
Issue (Month): ()
Pages: 1-9
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Handle: RePEc:ebl:ecbull:eb-02l10001

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Related research
Keywords: Information goods; unobservable quality; signal of quality; quality over-provision;

Find related papers by JEL classification:
L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
D8 - Microeconomics - - Information, Knowledge, and Uncertainty

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Guesnerie, Roger & Laffont, Jean-Jacques, 1984. "A complete solution to a class of principal-agent problems with an application to the control of a self-managed firm," Journal of Public Economics, Elsevier, vol. 25(3), pages 329-369, December. [Downloadable!] (restricted)
  2. Hart, Oliver & Moore, John, 1990. "Property Rights and the Nature of the Firm," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1119-58, December. [Downloadable!] (restricted)
    Other versions:
  3. Chen, Yongmin, 2000. "Promises, Trust, and Contracts," Journal of Law, Economics and Organization, Oxford University Press, vol. 16(1), pages 209-32, April.
  4. MacLeod, W Bentley & Malcomson, James M, 1988. "Reputation and Hierarchy in Dynamic Models of Employment," Journal of Political Economy, University of Chicago Press, vol. 96(4), pages 832-54, August. [Downloadable!] (restricted)
    Other versions:
  5. Dale W. Jorgenson, 2001. "Information Technology and the U.S. Economy," American Economic Review, American Economic Association, vol. 91(1), pages 1-32, March. [Downloadable!] (restricted)
  6. Mehmet Bac, 2000. "Switching costs and screening efficiency of incomplete contracts," Canadian Journal of Economics, Canadian Economics Association, vol. 33(4), pages 1034-1048, November. [Downloadable!] (restricted)
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