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Random Encounters and Information Diffusion about Markets

Author

Listed:
  • Jean J. Gabszewicz

    () (CORE, Université Catholique de Louvain, Belgium)

  • Marco A. Marini

    () (University of Rome La Sapienza and CREI, Italy)

  • Skerdilajda Zanaj

    () (CREA, Université du Luxembourg)

Abstract

International openness enhances social interactions between citizens of different countries or regions, and vice versa. Social exchanges in turn increase the trade flows between coun- tries. Accordingly, these meetings influence markets and prices. We analyze the interaction between the increased mobility following openness between two different countries and the corresponding effects on market outcomes. The main result of our analysis consists in show- ing that market prices tend at the limit to align with the duopoly solution. Nonetheless, this convergence can take two different paths depending on the size asymmetry between the countries.

Suggested Citation

  • Jean J. Gabszewicz & Marco A. Marini & Skerdilajda Zanaj, 2017. "Random Encounters and Information Diffusion about Markets," CREA Discussion Paper Series 17-24, Center for Research in Economic Analysis, University of Luxembourg.
  • Handle: RePEc:luc:wpaper:17-24
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    References listed on IDEAS

    as
    1. Nicolas Boccard & Xavier Wauthy, 2006. "Quality Choice, Sales Restriction And The Mode Of Competition," Manchester School, University of Manchester, vol. 74(1), pages 64-84, January.
    2. Mercenier, Jean & Schmitt, Nicolas, 1996. "On Sunk Costs and Trade Liberalization in Applied General Equilibrium," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(3), pages 553-571, August.
    3. Tanmoyee Chatterjee & Ajitava Raychaudhuri, 2004. "Product Quality, Income Inequality And Market Structure," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 29(1), pages 51-84, June.
    4. Edward P. Lazear, 1999. "Culture and Language," Journal of Political Economy, University of Chicago Press, vol. 107(S6), pages 95-126, December.
    5. Maskin, Eric & Tirole, Jean, 2001. "Markov Perfect Equilibrium: I. Observable Actions," Journal of Economic Theory, Elsevier, vol. 100(2), pages 191-219, October.
    6. Jaskold Gabszewicz, J. & Thisse, J. -F., 1979. "Price competition, quality and income disparities," Journal of Economic Theory, Elsevier, vol. 20(3), pages 340-359, June.
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    1. repec:eee:ecolec:v:149:y:2018:i:c:p:129-139 is not listed on IDEAS

    More about this item

    Keywords

    Vertically Differentiated Markets; Information Diffusion; Openness.;

    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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