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

Lars Frisell () and Johann Lagerloef ()
Additional contact information
Lars Frisell: Sveriges Riksbank, http://www.riksbank.com/research/frisell
Johann Lagerloef: Department of Economics, Royal Holloway, University of London, http://www.rhul.ac.uk/Economics/About-Us/lagerlof.html
Authors registered in the RePEc Author Service: Johan N. M. Lagerlöf ()

No 05/10, Royal Holloway, University of London: Discussion Papers in Economics from Department of Economics, Royal Holloway University of London

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.

Keywords: Price regulations; price discrimination; incomplete information; cheap talk; Robinson-Patman Act (search for similar items in EconPapers)
JEL-codes: D82 L11 L42 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com and nep-mic
Date: 2005-08, Revised 2005-08
View list of references

Downloads: (external link)
http://www.rhul.ac.uk/economics/Research/WorkingPapers/pdf/dpe0510.pdf (application/pdf)

Related works:
Working Paper: Eliciting Demand Information through Cheap Talk: An Argument in Favor of Price Regulations (2005)
Working Paper: Eliciting Demand Information through Cheap Talk: An Argument in Favour of Price Regulations (2005)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:hol:holodi:0510

Ordering information: This working paper can be ordered from
Egham Hill, Egham, Surrey, TW20 0EX, UK.

Access Statistics for this paper

More papers in Royal Holloway, University of London: Discussion Papers in Economics from Department of Economics, Royal Holloway University of London
Address: Egham Hill, Egham, Surrey, TW20 0EX, UK.
Series data maintained by Claire Blackman ().