Credit Merchandising in the Postbellum American South: Information and Barriers to Entry
AbstractRoger Ransom and Richard Sutch's research on the social and institutional changes in the postbellum American South, summarized in their One Kind of Freedom, raised many controversies. One of them concerns the degree of competition among the advancing merchants of the rural South. Ransom and Sutch's assertion that such merchants held a 'territorial monopoly'' is usually criticized as being at odds with the high level of postbellum entry in the rural merchandising sector and the absence of significant costs to entry. The question is still open, as shown by a recent special issue of Explorations in Economic History. This paper offers a contribution to this controversy by showing that high level of entry in the market and excessively high prices need not to be in conflict. In particular, using the theory of incomplete information games to study the competition between an advancing merchant and a potential entrant, the practice of over-pricing is shown to be an equilibrium behavior if interpreted as a way of signaling information about the market riskiness.
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Bibliographic InfoPaper provided by EconWPA in its series Economic History with number 0511004.
Length: 34 pages
Date of creation: 28 Nov 2005
Date of revision:
Note: Type of Document - pdf; pages: 34
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credit merchandising; asymmetric information;
Other versions of this item:
- Molinari M. Cristina, 2003. "Credit Merchandising in the Postbellum American South: Information and Barriers to Entry," Rivista di storia economica, Società editrice il Mulino, issue 1, pages 41-66.
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-12-09 (All new papers)
- NEP-COM-2005-12-09 (Industrial Competition)
- NEP-MKT-2005-12-09 (Marketing)
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