Information revelation in competitive markets
This paper analyzes a market with multiple sellers and horizontally differentiated products. We investigate the sellers’ incentives to reveal product relevant information that affects the buyer’s private valuation. The main finding is that if the number of sellers is sufficiently large, there is a unique symmetric equilibrium with full information disclosure. Thus, unlike the results by Lewis and Sappington (Int Econ Rev 35:309–327, 1994 ) and Johnson and Myatt (Am Econ Rev 93:756–784, 2006 ) for monopoly, which state that the monopolist reveals either full information or no information, intense competition results in a single extreme with respect to information disclosure. We show that the market is always inefficient, but the magnitude of inefficiency converges to zero at a high rate as competition intensifies. Copyright Springer-Verlag 2013
Volume (Year): 52 (2013)
Issue (Month): 1 (January)
|Contact details of provider:|| Web page: http://link.springer.de/link/service/journals/00199/index.htm |
|Order Information:||Web: http://link.springer.de/orders.htm|
References listed on IDEAS
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.:
- Sanford Grossman & Oliver Hart, .
"Disclosure Laws and Takeover Bids,"
Rodney L. White Center for Financial Research Working Papers
23-79, Wharton School Rodney L. White Center for Financial Research.
- Mark Bagnoli & Ted Bergstrom, 2005.
"Log-concave probability and its applications,"
Springer, vol. 26(2), pages 445-469, 08.
- David P. Myatt & Justin P. Johnson, 2004.
"On the Simple Economics of Advertising, Marketing, and Product Design,"
Economics Series Working Papers
185, University of Oxford, Department of Economics.
- Justin P. Johnson & David P. Myatt, 2006. "On the Simple Economics of Advertising, Marketing, and Product Design," American Economic Review, American Economic Association, vol. 96(3), pages 756-784, June.
- Juan-JosÈ Ganuza & JosÈ S. Penalva, 2010. "Signal Orderings Based on Dispersion and the Supply of Private Information in Auctions," Econometrica, Econometric Society, vol. 78(3), pages 1007-1030, 05.
- Caplin, A. & Nalebuff, B., 1989.
"Aggregation And Imperfect Competition: On The Existence Of Equilibrium,"
1989_30, Columbia University, Department of Economics.
- Caplin, Andrew & Nalebuff, Barry, 1991. "Aggregation and Imperfect Competition: On the Existence of Equilibrium," Econometrica, Econometric Society, vol. 59(1), pages 25-59, January.
- Andrew Caplin & Barry Nalebuff, 1990. "Aggregation and Imperfect Competition: On the Existence of Equilibrium," Cowles Foundation Discussion Papers 937, Cowles Foundation for Research in Economics, Yale University.
- Andrew F. Daughety & Jennifer F. Reinganum, 2008. "Imperfect competition and quality signalling," RAND Journal of Economics, RAND Corporation, vol. 39(1), pages 163-183.
- Giuseppe Moscarini & Marco Ottaviani, 1998.
"Price Competition for an Informed Buyer,"
Cowles Foundation Discussion Papers
1199, Cowles Foundation for Research in Economics, Yale University.
- Simon Board, 2009. "Revealing information in auctions: the allocation effect," Economic Theory, Springer, vol. 38(1), pages 125-135, January.
- Paul R. Milgrom, 1981.
"Good News and Bad News: Representation Theorems and Applications,"
Bell Journal of Economics,
The RAND Corporation, vol. 12(2), pages 380-391, Autumn.
- Paul R. Milgrom, 1979. "Good Nevs and Bad News: Representation Theorems and Applications," Discussion Papers 407R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Saak, Alexander E., 2006. "The optimal private information in single unit monopoly," Economics Letters, Elsevier, vol. 91(2), pages 267-272, May.
- Ivanov, Maxim, 2009. "Niche market or mass market?," Economics Letters, Elsevier, vol. 105(3), pages 217-220, December.
- Bergemann, Dirk & Pesendorfer, Martin, 2007.
"Information structures in optimal auctions,"
Journal of Economic Theory,
Elsevier, vol. 137(1), pages 580-609, November.
- Bergemann, Dirk & Pesendorfer, Martin, 2001. "Information Structures in Optimal Auctions," CEPR Discussion Papers 2991, C.E.P.R. Discussion Papers.
- Dirk Bergemann & Martin Pesendorfer, 2001. "Information Structures in Optimal Auctions," Cowles Foundation Discussion Papers 1323, Cowles Foundation for Research in Economics, Yale University.
- Steven Matthews & Andrew Postlewaite, 1985. "Quality Testing and Disclosure," RAND Journal of Economics, The RAND Corporation, vol. 16(3), pages 328-340, Autumn.
- Stivers Andrew E, 2004. "Unraveling of Information: Competition and Uncertainty," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 4(1), pages 1-18, December.
- Oliver Board, 2009. "COMPETITION AND DISCLOSURE -super-* ," Journal of Industrial Economics, Wiley Blackwell, vol. 57(1), pages 197-213, 03.
- Insuk Cheong & Jeong-Yoo Kim, 2004. "Costly Information Disclosure in Oligopoly," Journal of Industrial Economics, Wiley Blackwell, vol. 52(1), pages 121-132, 03.
- Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680, March.
- Shaked, Avner & Sutton, John, 1982. "Relaxing Price Competition through Product Differentiation," Review of Economic Studies, Wiley Blackwell, vol. 49(1), pages 3-13, January.
- Shaked, Avner & Sutton, John, 1983. "Natural Oligopolies," Econometrica, Econometric Society, vol. 51(5), pages 1469-83, September.
- Lewis, Tracy R & Sappington, David E M, 1994. "Supplying Information to Facilitate Price Discrimination," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 35(2), pages 309-27, May.
- Grossman, Sanford J, 1981. "The Informational Role of Warranties and Private Disclosure about Product Quality," Journal of Law and Economics, University of Chicago Press, vol. 24(3), pages 461-83, December.
- Vlad Mares & Mikhael Shor, 2008. "Industry concentration in common value auctions: theory and evidence," Economic Theory, Springer, vol. 35(1), pages 37-56, April.
When requesting a correction, please mention this item's handle: RePEc:spr:joecth:v:52:y:2013:i:1:p:337-365. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Guenther Eichhorn)or (Christopher F Baum)
If references are entirely missing, you can add them using this form.