Information and Quality in Expanding Markets
Can an increasing number of firms and brands exacerbate problems related to asymmetric information on product quality?. This working paper analyzes this trade-off between variety and information using Salop's (1979) framework by introducing quality uncertainty and a simple information diffusion process. As the number of firms increases, the marginal benefits of lower prices and wider product variety may be outweighed by a reduction in consumer information and average quality. Thus, market expansions require a parallel improvement in information mechanisms. Because information has public good characteristics, it is an open question as to how efficiently the market may respond to this requirement.
|Date of creation:||Nov 2010|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +34 94 487 52 52
Fax: +34 94 424 46 21
Web page: http://www.fbbva.esEmail:
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:fbb:wpaper:2010102. 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: (Fundacion BBVA / BBVA Foundation)
If references are entirely missing, you can add them using this form.