ENDOGENOUS ACQUISITION OF INFORMATION ON CONSUMER WILLINGNESS TO PAY IN A PRODUCT DIFFERENTIATED DUOPOLY

Qihong Liu ()

Industrial Organization from University Library of Munich, Germany

Abstract: We investigate how the endogenous acquisition of information, of a certain quality level, on consumers' willingness to pay (location) affects the equilibrium prices and welfare in a spatial price discrimination model. Higher information quality implies that the firms who acquire the information can identify the location of each consumer more accurately. By varying the information quality we are able to obtain the equilibrium in the game for all levels of price discrimination and in the limit the case of perfect price discrimination. This gives us insights about equilibrium behavior in markets (especially on-line markets) where: 1) Information on consumer characteristics is used by the firms to facilitate price discrimination and 2) The quality of information is constantly improving due to advances of the information technology (IT). We show that information is beneficial for the consumer welfare, which is maximized at ``moderate'' levels of information quality. Firms' profits exhibit a U-shape pattern as a function of the information quality.

Keywords: Price discrimination; Information quality; Information acquisition (search for similar items in EconPapers)
JEL-codes: D43 L13 O30 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2001-10-04
New Economics Papers: this item is included in nep-mic
Note: Type of Document - PDF; prepared on IBM PC - PC; to print on HP/PostScript/Franciscan monk; pages: 48 ; figures: included
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Related works:
Working Paper: Endogenous Acquisition of Information on Consumer Willingness to Pay in a Product Differentiated Duopoly (2001)
Working Paper: Endogenous Acquisition of Information on Consumers Willingness to Pay in a Product Differentiated Duopoly (2001)
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpio:0110001

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