Information externalities in a model of sales
We anlayze Varian's (1980) Model of Sales, and show that when the number of uninformed consumers increases, prices become less competitive for all consumers. Thus, the influx of uninformed consumers generates a negative externality increasing the prices paid by informed consumers.
Volume (Year): 4 (2001)
Issue (Month): 7 ()
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- Varian, Hal R, 1980. "A Model of Sales," American Economic Review, American Economic Association, vol. 70(4), pages 651-59, September.
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