Hotelling Duopoly with Uninformed Consumers

Michele Polo

Journal of Industrial Economics, 1991, vol. 39, issue 6, 701-15

Abstract: This paper analyzes price competition in a duopoly a la H. Hotelling in which perfectly and different types of imperfectly informed consumers coexist. If some consumers don't observe prices, the equilibrium price tends to rise above the full information level; moreover, price dispersion can occur in equilibrium. Both results are in accordance with the literature on this issue. However, if consumers observe prices but not varieties, the equilibrium prices tend to fall below the full information level. Finally, in this latter case, not all the consumers are better off when the market moves to full information. Copyright 1991 by Blackwell Publishing Ltd.

Date: 1991
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