Buying Frenzies and Seller-Induced Excess Demand

Patrick DeGraba

RAND Journal of Economics, 1995, vol. 26, issue 2, 331-342

Abstract: I explain why a monopolist would knowingly create excess demand. Suppose customers initially do not know their valuation for a good but over time become informed. Although customers prefer purchasing after becoming informed, a monopolist prefers selling to customers while uninformed, because a group of uninformed customers has a more homogeneous (expected) valuation for the good than do informed customers. Selling fewer units than the number of customers induces customers to purchase while uninformed, because anyone waiting to purchase until becoming informed finds no units available. This "buying frenzy" behavior allows the monopolist to set price above the "informed" market-clearing price.

Date: 1995
References: Add references at CitEc
Citations: View citations in EconPapers (76)

Downloads: (external link)
http://links.jstor.org/sici?sici=0741-6261%2819952 ... O%3B2-5&origin=repec full text (application/pdf)
Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.

Related works:
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: https://EconPapers.repec.org/RePEc:rje:randje:v:26:y:1995:i:summer:p:331-342

Ordering information: This journal article can be ordered from
https://editorialexp ... i-bin/rje_online.cgi

Access Statistics for this article

More articles in RAND Journal of Economics from The RAND Corporation
Bibliographic data for series maintained by ().