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Firm-Specific Information, Product Differentiation, and Industry Equilibrium

  • Perloff, Jeffrey M
  • Salop, Steven C

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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Article provided by Oxford University Press in its journal Oxford Economic Papers.

Volume (Year): 38 (1986)
Issue (Month): 0 (Suppl. Nov.)
Pages: 184-202

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Handle: RePEc:oup:oxecpp:v:38:y:1986:i:0:p:184-202
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  1. Seade, Jesus K, 1980. "On the Effects of Entry," Econometrica, Econometric Society, vol. 48(2), pages 479-89, March.
  2. Steven Salop & Joseph Stiglitz, 1977. "Bargains and ripoffs: a model of monopolistically competitive price dispersion," Special Studies Papers 94, Board of Governors of the Federal Reserve System (U.S.).
  3. George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, Oxford University Press, vol. 84(3), pages 488-500.
  4. Louis L. Wilde & Alan Schwartz, 1979. "Equilibrium Comparison Shopping," Review of Economic Studies, Oxford University Press, vol. 46(3), pages 543-553.
  5. Stiglitz, J E, 1979. "Equilibrium in Product Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 69(2), pages 339-45, May.
  6. Stiglitz, Joseph E, 1975. "The Theory of "Screening," Education, and the Distribution of Income," American Economic Review, American Economic Association, vol. 65(3), pages 283-300, June.
  7. Robert Wilson, 1977. "A Bidding Model of Perfect Competition," Review of Economic Studies, Oxford University Press, vol. 44(3), pages 511-518.
  8. Steven Salop & Joseph Stiglitz, 1977. "Bargains and Ripoffs: A Model of Monopolistically Competitive Price Dispersion," Review of Economic Studies, Oxford University Press, vol. 44(3), pages 493-510.
  9. Diamond, Peter A., 1971. "A model of price adjustment," Journal of Economic Theory, Elsevier, vol. 3(2), pages 156-168, June.
  10. Michael Spence, 1973. "Job Market Signaling," The Quarterly Journal of Economics, Oxford University Press, vol. 87(3), pages 355-374.
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