Eliciting Demand Information through Cheap Talk: An Argument in Favour of Price Regulations
A firm must decide whether to launch a new product. A launch implies considerable fixed costs, so the firm would like to assess downstream demand before it decides. We study under which conditions a potential buyer would be willing to reveal his willingness to pay under different pricing regimes. We show that the firm's welfare - as well as consumers' - may be higher with a commitment to linear pricing than when pricing is unrestricted. That is, if informational asymmetries are significant, price regulations such as the Robinson-Patman Act may be endorsed by all parties.
|Date of creation:||Nov 2005|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
|Order Information:|| Email: |
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.:
- Schmalensee, Richard, 1981.
"Output and Welfare Implications of Monopolistic Third-Degree Price Discrimination,"
American Economic Review,
American Economic Association, vol. 71(1), pages 242-47, March.
- Schmalensee, Richard., 1980. "Output and welfare implications of monopolistic third-degree price discrimination," Working papers 1095-80., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- V. Crawford & J. Sobel, 2010.
"Strategic Information Transmission,"
Levine's Working Paper Archive
544, David K. Levine.
- Varian, Hal R, 1985. "Price Discrimination and Social Welfare," American Economic Review, American Economic Association, vol. 75(4), pages 870-75, September.
- repec:oup:qjecon:v:98:y:1983:i:2:p:267-89 is not listed on IDEAS
- Farrell, Joseph & Gibbons, Robert, 1995. "Cheap Talk about Specific Investments," Journal of Law, Economics and Organization, Oxford University Press, vol. 11(2), pages 313-34, October.
- Katz, Michael L, 1987. "The Welfare Effects of Third-Degree Price Discrimination in," American Economic Review, American Economic Association, vol. 77(1), pages 154-67, March.
When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:5343. 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: ()The email address of this maintainer does not seem to be valid anymore. Please ask to update the entry or send us the correct address
If references are entirely missing, you can add them using this form.