Random Encounters and Information Diffusion about Product Quality

Jean Gabszewicz, Marco Marini and Skerdilajda Zanaj

No 3/21, Working Papers from Sapienza University of Rome, DISS

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 profi?t-maximizing ?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: Consumer Encounters; Information Di¤usion; Country Size; Product Quality. (search for similar items in EconPapers)
JEL-codes: D42 D43 D83 F15 L13 (search for similar items in EconPapers)
Date: 2021-02
New Economics Papers: this item is included in nep-com and nep-ind
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://www.diss.uniroma1.it/sites/default/files/al ... iczetal_wp3_2021.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 500 Can't connect to www.diss.uniroma1.it:80 (A connection attempt failed because the connected party did not properly respond after a period of time, or established connection failed because connected host has failed to respond.)

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 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 Markets (2017)
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:saq:wpaper:3/21

Access Statistics for this paper

More papers in Working Papers from Sapienza University of Rome, DISS Contact information at EDIRC.
Bibliographic data for series maintained by Pierluigi Montalbano ().