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Firm-Specific Information, Product Differentiation, and Industry Equilibrium

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  • Perloff, Jeffrey M
  • Salop, Steven C

Abstract

Where consumers have imperfect i nformation about specific firms' prices and lack information about the market, f irms have informational market power. In general, improving the consumers' infor mation about each firm's price will not necessarily lower the average market pri ce. The authors show however that certain types ofimprovements will lower price. Moreover a reduction in barriers to entry (e.g., capital costs) will lower pri ce, holding information constant. Where a significant number (but not all), cons umers have perfect information, single-price equilibria are impossible. Copyright 1986 by Royal Economic Society.

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  • Perloff, Jeffrey M & Salop, Steven C, 1986. "Firm-Specific Information, Product Differentiation, and Industry Equilibrium," Oxford Economic Papers, Oxford University Press, vol. 38(0), pages 184-202, Suppl. No.
    • Handle: RePEc:oup:oxecpp:v:38:y:1986:i:0:p:184-202
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    Cited by:

    1. Gladys López-Acevedo, 1997. "Quantal response equilibria for posted offer-markets," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 12(2), pages 95-131.
    2. Baylis, Kathy & Perloff, Jeffrey M., 2001. "Price Dispersion on the Internet: Good Firms and Bad Firms," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt2t0770rn, Department of Agricultural & Resource Economics, UC Berkeley.
    3. Thomas A Abbott III, 1992. "Price Dispersion In U.S. Manufacturing: Implications For The Aggregation Of Products And Firms," Working Papers 92-3, Center for Economic Studies, U.S. Census Bureau.
    4. Raymundo M. Campos-Vázquez & Eduardo M. Medina-Cortina, 2019. "Pass-through and competition: the impact of soft drink taxes as seen through Mexican supermarkets," Latin American Economic Review, Springer;Centro de Investigaciòn y Docencia Económica (CIDE), vol. 28(1), pages 1-23, December.
    5. Dennis W. Carlton & Jeffrey M. Perloff, 1989. "The Economics of Information," Food Marketing Policy Center Research Reports 005, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy.
    6. Ran Spiegler, 2006. "The Market for Quacks," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 73(4), pages 1113-1131.
    7. Wisnicki, Bartlomiej, 2022. "Consumer inertia fosters product quality," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 96(C).
    8. Topolyan, Iryna, 2017. "Price competition when three are few and four are many," International Journal of Industrial Organization, Elsevier, vol. 54(C), pages 175-191.
    9. Baylis, Kathy & Perloff, Jeffrey M., 2001. "Price Dispersion on the Internet: Good Firms and Bad Firms," Institute for Research on Labor and Employment, Working Paper Series qt2t0770rn, Institute of Industrial Relations, UC Berkeley.
    10. Kathy Baylis & Jeffrey Perloff, 2002. "Price Dispersion on the Internet: Good Firms and Bad Firms," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 21(3), pages 305-324, November.
    11. Zamani, Omid & Bittmann, Thomas & Loy, Jens-Peter, 2018. "Search costs and cost pass-through: Evidence for the Iranian poultry market," Economics Letters, Elsevier, vol. 171(C), pages 119-122.
    12. Muck, Johannes, 2016. "Tariff-mediated network effects with incompletely informed consumers," DICE Discussion Papers 210, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    13. Thomas A Abbott Iii, 1989. "Price Dispersion in U.S. Manufacturing," Working Papers 89-7, Center for Economic Studies, U.S. Census Bureau.

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