Roger Waldeck () (Ecole Nationale Supérieure des Télécommunications de Bretagne, Département d'Economie, Technopôle de Brest Iroise, BP 832, 29285 Brest Cédex, FRANCE)
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The impact of imperfect information on the price setting behaviour of firms is analysed. Specifically, consumers support an information cost to become informed about prices. Firms are endowed with U-shaped average cost curves. If a firm does not supply more than its competitive supply as determined by its marginal cost schedule, then we show that the existence of a pure strategy equilibrium is conditional on the rationing rule employed. If uninformed consumers are served first then the monopoly price is the sole equilibrium whenever consumers' information costs are high enough. Otherwise, a pure strategy equilibrium fails to exist contrary to the results of Salop and Stiglitz (1977) or Braverman (1980) who implicitly suppose that firms supply all the demand at a given price.
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Article provided by Springer in its journal Economic Theory.
Find related papers by JEL classification: D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection D45 - Microeconomics - - Market Structure and Pricing - - - Rationing; Licensing D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information