IDEAS home Printed from https://ideas.repec.org/p/hol/holodi/0510.html

Eliciting Demand Information through Cheap Talk: An Argument in Favor of Price Regulations

Author

Abstract

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.

Suggested Citation

  • Lars Frisell & Johann Lagerloef, 2005. "Eliciting Demand Information through Cheap Talk: An Argument in Favor of Price Regulations," Royal Holloway, University of London: Discussion Papers in Economics 05/10, Department of Economics, Royal Holloway University of London, revised Aug 2005.
    • Handle: RePEc:hol:holodi:0510
    as

    Download full text from publisher

    File URL: http://www.rhul.ac.uk/economics/Research/WorkingPapers/pdf/dpe0510.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hol:holodi:0510. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Claire Blackman The email address of this maintainer does not seem to be valid anymore. Please ask Claire Blackman to update the entry or send us the correct address (email available below). General contact details of provider: http://www.rhul.ac.uk/economics/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.