Endogenous Acquisition of Information on Consumers Willingness to Pay in a Product Differentiated Duopoly
AbstractWe look at the incentives of two firms, who produce horizontally differentiated products, to acquire information of a certain quality on consumer willingness to pay. A firm who possesses such information can offer its product to different consumer groups at different prices (third degree price discrimination). We show that ``acquiring information'' and ``price discriminating'' is each firm's dominant strategy (for relatively low information costs) resulting in lower profit than when neither firm is engaged in price discrimination. Moreover, and given that firms price discriminate, equilibrium profits and average price exhibit a U-shape as a function of the information quality. Consumers are unambiguously better off under price discrimination as each one pays a lower price than the uniform non- discriminatory price.
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Bibliographic InfoPaper provided by EconWPA in its series Industrial Organization with number 0105002.
Length: 34 pages
Date of creation: 30 May 2001
Date of revision:
Note: Type of Document - Acrobat PDF; prepared on PC; to print on PostScript (letter size paper); pages: 34; figures: included
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Price discrimination; information quality; information acquisition;
Other versions of this item:
- Qihong Liu & Konstantinos Serfes, 2001. "Endogenous Acquisition of Information on Consumer Willingness to Pay in a Product Differentiated Duopoly," Department of Economics Working Papers 01-03, Stony Brook University, Department of Economics.
- Qihong Liu Konstantinos Serfes, 2001. "Endogenous Acquisition Of Information On Consumer Willingness To Pay In A Product Differentiated Duopoly," Industrial Organization 0110001, EconWPA.
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- O30 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2001-06-08 (All new papers)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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