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Quality over-provision of information goods

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  • Xiaopeng Xu

    ()
    (University of California-Berkeley)

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    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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    File URL: http://www.accessecon.com/pubs/EB/2002/Volume12/EB-02L10001A.pdf
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    Bibliographic Info

    Article provided by AccessEcon in its journal Economics Bulletin.

    Volume (Year): 12 (2002)
    Issue (Month): 5 ()
    Pages: 1-9

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    Handle: RePEc:ebl:ecbull:eb-02l10001

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    Related research

    Keywords: Information goods;

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    References

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    1. Dale W. Jorgenson, 2001. "Information Technology and the U.S. Economy," American Economic Review, American Economic Association, vol. 91(1), pages 1-32, March.
    2. 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.
    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.
    5. Hart, Oliver D. & Moore, John, 1990. "Property Rights and the Nature of the Firm," Scholarly Articles 3448675, Harvard University Department of Economics.
    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.
    7. Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061414, December.
    8. von Ungern-Sternberg, Thomas & von Weizsacker, Carl Christian, 1985. "The Supply of Quality on a Market for "Experience Goods."," Journal of Industrial Economics, Wiley Blackwell, vol. 33(4), pages 531-51, June.
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