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Market Transparency and Product Differentiation

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  • Christian Schultz

    (Institute of Economics, University of Copenhagen)

Abstract

In a Hotelling market with endogenous choice of product characteristics increasing market transparency on the consumer side leads to less product differentiation, and lower prices and profits. This is welfare improving for all consumers and total surplus increases.

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File URL: http://www.econ.ku.dk/cie/dp/dp_2000-2002/2002-02.pdf/
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Bibliographic Info

Paper provided by University of Copenhagen. Department of Economics. Centre for Industrial Economics in its series CIE Discussion Papers with number 2002-02.

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Length: 8 pages
Date of creation: Nov 2002
Date of revision:
Handle: RePEc:kud:kuieci:2002-02

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Keywords: market transparency; product differentiation; competition policy;

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References

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  1. Bester, Helmut & Petrakis, Emmanuel, 1995. "Price competition and advertising in oligopoly," European Economic Review, Elsevier, vol. 39(6), pages 1075-1088, June.
  2. Wolinsky, Asher, 1984. "Product Differentiation with Imperfect Information," Review of Economic Studies, Wiley Blackwell, vol. 51(1), pages 53-61, January.
  3. Varian, Hal R, 1980. "A Model of Sales," American Economic Review, American Economic Association, vol. 70(4), pages 651-59, September.
  4. Boone, Jan & Potters, Jan, 2002. "Transparency, Prices and Welfare with Imperfect Substitutes," CEPR Discussion Papers 3256, C.E.P.R. Discussion Papers.
  5. Dudey, Marc, 1990. "Competition by Choice: The Effect of Consumer Search on Firm Location Decisions," American Economic Review, American Economic Association, vol. 80(5), pages 1092-1104, December.
  6. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
  7. Stahl, Konrad, 1982. "Differentiated Products, Consumer Search, and Locational Oligopoly," Journal of Industrial Economics, Wiley Blackwell, vol. 31(1-2), pages 97-113, September.
  8. Nilsson, Arvid, 1999. "Transparency and Competition," Working Paper Series in Economics and Finance 298, Stockholm School of Economics, revised 29 Nov 1999.
  9. Asher Wolinsky, 1983. "Retail Trade Concentration Due to Consumers' Imperfect Information," Bell Journal of Economics, The RAND Corporation, vol. 14(1), pages 275-282, Spring.
  10. Jeffrey H. Fischer & Joseph E. Harrington Jr., 1996. "Product Variety and Firm Agglomeration," RAND Journal of Economics, The RAND Corporation, vol. 27(2), pages 281-309, Summer.
  11. H. Peter Møllgaard & Per Baltzer Overgaard, 1999. "Market Transparency: A Mixed Blessing?," CIE Discussion Papers 1999-15, University of Copenhagen. Department of Economics. Centre for Industrial Economics, revised Feb 2000.
  12. Helmut Bester, 1998. "Quality Uncertainty Mitigates Product Differentiation," RAND Journal of Economics, The RAND Corporation, vol. 29(4), pages 828-844, Winter.
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Citations

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Cited by:
  1. Hofmann, Annette & Nell, Martin, 2008. "The impact of intermediary remuneration in differentiated insurance markets," Working Papers on Risk and Insurance 22, University of Hamburg, Institute for Risk and Insurance.
  2. Schultz, Christian, 2014. "Consumer poaching, brand switching, and price transparency," Economics Letters, Elsevier, vol. 123(3), pages 266-269.
  3. Boone, J. & Potters, J.J.M., 2002. "Transparency, Prices and Welfare with Imperfect Substitutes," Discussion Paper 2002-7, Tilburg University, Center for Economic Research.
  4. Rasch, Alexander & Herre, Jesko, 2013. "Customer-side transparency, elastic demand, and tacit collusion under differentiation," Information Economics and Policy, Elsevier, vol. 25(1), pages 51-59.
  5. Odd Rune Straume & Kurt Brekke & Robert Nuscheler, 2004. "Gatekeeping In Health Care," Royal Economic Society Annual Conference 2004 83, Royal Economic Society.
  6. KNAUFF, Malgorzata, 2006. "Market transparency and Bertrand competition," CORE Discussion Papers 2006037, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  7. Christian Schultz, 2007. "Transparency and Product Variety," CIE Discussion Papers 2007-13, University of Copenhagen. Department of Economics. Centre for Industrial Economics.
  8. Focht, Uwe & Richter, Andreas & Schiller, Jörg, 2006. "Intermediation, compensation and tacit collusion in insurance markets," Working Papers on Risk and Insurance 17, University of Hamburg, Institute for Risk and Insurance.
  9. Focht, Uwe & Richter, Andreas & Schiller, Jörg, 2009. "Intermediation and matching in insurance markets," FZID Discussion Papers 04-2009, University of Hohenheim, Center for Research on Innovation and Services (FZID).
  10. Stühmeier, Torben, 2012. "Target Advertising and Market Transparency," Annual Conference 2012 (Goettingen): New Approaches and Challenges for the Labor Market of the 21st Century 62021, Verein für Socialpolitik / German Economic Association.
  11. Boone, Jan & Pottersz, Jan, 2006. "Transparency and prices with imperfect substitutes," Economics Letters, Elsevier, vol. 93(3), pages 398-404, December.

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