Quality over-provision of information goods

Xiaopeng Xu ()
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Xiaopeng Xu: University of California-Berkeley

Economics Bulletin, 2002, vol. 12, issue 5, 1-9

Abstract: This paper studies a producer's quality choice of an information good. The marginal cost of quality provision for the good is decreasing. The buyer does not observe the actual quality but can learn a signal which is the sum of quality and a noise. It shows that the producer has an incentive to over-supply quality. Moreover, and interestly, all types of producer may over-supply quality.

Keywords: Information; goods (search for similar items in EconPapers)
JEL-codes: D8 L1 (search for similar items in EconPapers)
Date: 2002-03-08
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