Consumer Information and the Limits to Competition
Mark Armstrong () and
No 888, Economics Series Working Papers from University of Oxford, Department of Economics
This paper studies competition between firms when consumers observe a pri-vate signal of their preferences over products. Within the class of signal structures which allow pure-strategy pricing equilibria, we derive signal structures which are optimal for firms and those which are optimal for consumers. The firm-optimal signal structure amplifies the underlying product differentiation, thereby relaxÂ¬ing competition, while ensuring that consumers purchase their preferred product, thereby maximizing total welfare. The consumer-optimal structure dampens difÂ¬ferentiation, which intensifies competition, but induces some consumers with weak preferences between products to buy their less-preferred product. The analysis sheds light on the limits to competition when the information possessed by conÂ¬sumers can be designed flexibly.
Keywords: Information design; Bertrand competition; product differentiation; online platforms (search for similar items in EconPapers)
JEL-codes: D43 D47 D83 L13 L15 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-ind and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
https://www.economics.ox.ac.uk/materials/working_p ... ucture26nov-2019.pdf (application/pdf)
Working Paper: Consumer information and the limits to competition (2019)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:oxf:wpaper:888
Access Statistics for this paper
More papers in Economics Series Working Papers from University of Oxford, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Anne Pouliquen (). This e-mail address is bad, please contact .