Learning in a Perfectly Competitive Market
We study learning in perfect competition. A price-taking firm sells a good whose quality is unknown to some buyers. The uninformed buyers use the price to infer information about quality. The presence of noise on the supply prevents perfect learning. Even though the firm is a price-taker, information is disseminated though the price. The shape of the supply curve influences the amount of information contained in the price, which, in turn, affects the competitive equilibrium through the learning process of the uninformed buyers.
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