Beneficial consumer fraud

Silvia Martínez-Gorricho ()
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Silvia Martínez-Gorricho: Dpto. Análisis Económico Aplicado

Working Papers. Serie AD from Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie)

Abstract: This article considers a two-sided private information model. We assume that two exogenouslygiven qualities are offered in a monopolistic market. Prices are fixed. A low quality seller choosesto be either honest (by charging the lower market price) or dishonest (by charging the higherprice). We discuss the signalling role of consumers’ information on the equilibrium level ofdishonesty, incidence of fraud and trade. We demonstrate that the equilibrium incidence offraud is non-monotonic in information. This result holds as long as information is noisy andregardless of its private or public nature. Welfare consequences are ambiguous.

Keywords: Consumer Fraud; Asymmetric Information; Price Signalling (search for similar items in EconPapers)
JEL-codes: D42 D82 G14 L15 L51 (search for similar items in EconPapers)
Pages: 65 pages
Date: 2012-04
New Economics Papers: this item is included in nep-cta
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http://www.ivie.es/downloads/docs/wpasad/wpasad-2012-13.pdf Fisrt version / Primera version, 2012 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:ivi:wpasad:2012-13

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