Endogenous Acquisition Of Information On Consumer Willingness To Pay In A Product Differentiated Duopoly
AbstractWe investigate how the endogenous acquisition of information, of a certain quality level, on consumers' willingness to pay (location) affects the equilibrium prices and welfare in a spatial price discrimination model. Higher information quality implies that the firms who acquire the information can identify the location of each consumer more accurately. By varying the information quality we are able to obtain the equilibrium in the game for all levels of price discrimination and in the limit the case of perfect price discrimination. This gives us insights about equilibrium behavior in markets (especially on-line markets) where: 1) Information on consumer characteristics is used by the firms to facilitate price discrimination and 2) The quality of information is constantly improving due to advances of the information technology (IT). We show that information is beneficial for the consumer welfare, which is maximized at ``moderate'' levels of information quality. Firms' profits exhibit a U-shape pattern as a function of the information quality.
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Bibliographic InfoPaper provided by EconWPA in its series Industrial Organization with number 0110001.
Length: 48 pages
Date of creation: 04 Oct 2001
Date of revision:
Note: Type of Document - PDF; prepared on IBM PC - PC; to print on HP/PostScript/Franciscan monk; pages: 48 ; 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 Consumers Willingness to Pay in a Product Differentiated Duopoly," Industrial Organization 0105002, 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
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