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Firm-specific information, product differentiation, and industry equilibrium

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Author Info

  • Perloff, Jeffrey M
  • Salop, Steven

Abstract

Where consumers have imperfect information about specific firms' prices and lack information about the market, firms have informational market power. In general, improving the consumer's information about each firm's price will not necessarily lower average market price. We show, however, that certain types of improvements will lower price. Moreover, a reduction in barriers to entry (e.g., capital costs) will lower price-holding information constant. Where a significant number (but not all) consumers have perfect information, single-price equilibria are impossible.

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Bibliographic Info

Paper provided by Department of Agricultural & Resource Economics, UC Berkeley in its series Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series with number qt60v9q47r.

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Date of creation: 01 Mar 1985
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Handle: RePEc:cdl:agrebk:qt60v9q47r

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Related research

Keywords: competition; consumers; consumers' preferences; consumer education; mathematical models; demand elasticity; economics; equilibrium; marketing;

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Cited by:
  1. Baylis, Kathy & Perloff, Jeffrey M., 2001. "Price Dispersion on the Internet: Good Firms and Bad Firms," Institute for Research on Labor and Employment, Working Paper Series qt2t0770rn, Institute of Industrial Relations, UC Berkeley.
  2. Thomas A Abbott Iii, 1989. "Price Dispersion in U.S. Manufacturing," Working Papers 89-7, Center for Economic Studies, U.S. Census Bureau.
  3. Dennis W. Carlton & Jeffrey M. Perloff, 1989. "The Economics of Information," Food Marketing Policy Center Research Reports 005, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy.
  4. Rani Spiegler, 2005. "The Market for Quacks," Levine's Bibliography 784828000000000634, UCLA Department of Economics.
  5. Thomas A Abbott III, 1992. "Price Dispersion In U.S. Manufacturing: Implications For The Aggregation Of Products And Firms," Working Papers 92-3, Center for Economic Studies, U.S. Census Bureau.

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