Asymmetric Information and Price Stickiness in Imperfectly Competitive Markets

Torben M. Andersen and Morten Hviid
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Torben M. Andersen: Institute of Economics, University of Aarhus

No 90-10, Discussion Papers from University of Copenhagen. Department of Economics

Abstract: In a duopoly model with sequential price setting we show that as a result of private information prices are either sticky in the sense that they are not adjusted to available information on market conditions, or prices are adjusted but become upward biased. Hence asymmetric information causes suboptimal prices in imperfectly competitive markets.

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