Beneficial consumer fraud
AbstractThis article considers a two-sided private information model. We assume that two exogenouslygiven qualities are offered in a monopolistic market. Prices are fixed. A low quality seller choosesto be either honest (by charging the lower market price) or dishonest (by charging the higherprice). We discuss the signalling role of consumers’ information on the equilibrium level ofdishonesty, incidence of fraud and trade. We demonstrate that the equilibrium incidence offraud is non-monotonic in information. This result holds as long as information is noisy andregardless of its private or public nature. Welfare consequences are ambiguous.
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Bibliographic InfoPaper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number 2012-13.
Length: 65 pages
Date of creation: Apr 2012
Date of revision:
Publication status: Published by Ivie
Consumer Fraud; Asymmetric Information; Price Signalling;
Find related papers by JEL classification:
- D42 - Microeconomics - - Market Structure and Pricing - - - Monopoly
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
- L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
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