Endogenous Acquisition of Information on Consumers Willingness to Pay in a Product Differentiated Duopoly

Qihong Liu () and Konstantinos Serfes ()

Industrial Organization from EconWPA

Abstract: We look at the incentives of two firms, who produce horizontally differentiated products, to acquire information of a certain quality on consumer willingness to pay. A firm who possesses such information can offer its product to different consumer groups at different prices (third degree price discrimination). We show that ``acquiring information'' and ``price discriminating'' is each firm's dominant strategy (for relatively low information costs) resulting in lower profit than when neither firm is engaged in price discrimination. Moreover, and given that firms price discriminate, equilibrium profits and average price exhibit a U-shape as a function of the information quality. Consumers are unambiguously better off under price discrimination as each one pays a lower price than the uniform non- discriminatory price.

Keywords: Price discrimination; information quality; information acquisition (search for similar items in EconPapers)
JEL-codes: D43 L13 O30 (search for similar items in EconPapers)
Date: 2001-05-30
Note: Type of Document - Acrobat PDF; prepared on PC; to print on PostScript (letter size paper); pages: 34; figures: included

Downloads: (external link)
http://129.3.20.41/eps/io/papers/0105/0105002.pdf (application/pdf)

Related works:
Working Paper: Endogenous Acquisition of Information on Consumer Willingness to Pay in a Product Differentiated Duopoly (2001)
Working Paper: ENDOGENOUS ACQUISITION OF INFORMATION ON CONSUMER WILLINGNESS TO PAY IN A PRODUCT DIFFERENTIATED DUOPOLY (2001)
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:wpa:wuwpio:0105002

Access Statistics for this paper

More papers in Industrial Organization from EconWPA
Series data maintained by EconWPA ().