Entry, Fixed Costs and the Aggregation of Private Information

Rafael Rob
Authors registered in the RePEc Author Service: Rafael Robb

The Review of Economic Studies, 1987, vol. 54, issue 4, 619-630

Abstract: We investigate the ability of the price system to aggregate private information in a market of uncertain size and where set-up costs are incurred by entrants. It is shown that the equilibrium is random even when the totality of private information is so large that aggregate uncertainty is virtually non-existent. In particular, the limiting equilibrium does not approach the full-information, Walrasian outcome. Hence, the model identifies a technological factor (increasing returns) which gives rise to informational losses.

Date: 1987
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Persistent link: https://EconPapers.repec.org/RePEc:oup:restud:v:54:y:1987:i:4:p:619-630.

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