Random Encounters and Information Diffusion about Product Quality

Jean J. Gabszewicz, Marco Marini and Skerdilajda Zanaj

No 309915, FEEM Working Papers from Fondazione Eni Enrico Mattei (FEEM)

Abstract: This paper explores how social interactions among consumers shape markets. In a two-country model, consumers meet and exchange information about the quality of the goods. As information spreads, the demands evolve, affecting the prices and quantities manufactured by pro t-maximizing fi rms. We show that market prices with informational frictions reach the duopoly price with full information, at the limit. However, this convergence can take two different paths depending on the size asymmetry between countries. In particular, when countries are of very different sizes, the single market does not immediately turn into a duopoly and monopoly prices may persist for several periods. Hence, the price-reducing trade effects may take longer to appear. In view of an intense globalization process, understanding how social meetings affect market outcomes is critical for understanding the performance of international economic integration.

Keywords: Demand; and; Price; Analysis (search for similar items in EconPapers)
Pages: 31
Date: 2021-03-16
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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https://ageconsearch.umn.edu/record/309915/files/ndl2021-002.pdf (application/pdf)

Related works:
Working Paper: Random encounters and information diffusion about product quality (2024)
Journal Article: Random encounters and information diffusion about product quality (2023)
Working Paper: Random Encounters and Information Diffusion about Product Quality (2021)
Working Paper: Random Encounters and Information Di§usion about Product Quality (2021)
Working Paper: Random Encounters and Information Diffusion about Product Quality (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:feemwp:309915

DOI: 10.22004/ag.econ.309915

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