Noisy Signaling in Monopoly

Leonard Mirman, Egas Salgueiro () and Marc Santugini ()
Additional contact information
Marc Santugini: IEA, HEC Montréal, http://www.hec.ca/iea/

No 11-03, Cahiers de recherche from HEC Montréal, Institut d'économie appliquée

Abstract: We study the informational role of prices in a stochastic environment. We provide a closed-form solution of the monopoly problem when the price imperfectly signals quality to the uninformed buyers. We then study the effect of noise on output, market price, information flows, and expected profits. The presence of noise may reduce the informational externality due to asymmetric information, which increases the firm's expected profits.

Keywords: Asymmetric information; learning; monopoly; noise; quality; rational expectations; signaling (search for similar items in EconPapers)
JEL-codes: D21 D42 D82 D83 D84 L12 L15 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2011-03, Revised 2013-05
New Economics Papers: this item is included in nep-com, nep-cta and nep-ind
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Noisy signaling in monopoly (2014)
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