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Firm-specific information, product differentiation, and industry equilibrium

Jeffrey Perloff and Steven Salop

Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series from Department of Agricultural & Resource Economics, UC Berkeley

Abstract: Where consumers have imperfect information about specific firms' prices and lack information about the market, firms have informational market power. In general, improving the consumer's information about each firm's price will not necessarily lower average market price. We show, however, that certain types of improvements will lower price. Moreover, a reduction in barriers to entry (e.g., capital costs) will lower price-holding information constant. Where a significant number (but not all) consumers have perfect information, single-price equilibria are impossible.

Keywords: competition; consumers; consumers' preferences; consumer education; mathematical models; demand elasticity; economics; equilibrium; marketing (search for similar items in EconPapers)
Date: 1985-03-01
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Related works:
Journal Article: Firm-Specific Information, Product Differentiation, and Industry Equilibrium (1986) Downloads
Working Paper: Firm-specific information, product differentiation, and industry equilibrium (1985) Downloads
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