Strategic pricing, signalling, and costly information acquisition

Bester, Helmut and Ritzberger, Klaus (2001) Strategic pricing, signalling, and costly information acquisition. International Journal of Industrial Organization, 19 (9). pp. 1347-1361.

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Abstract or Table of Contents

Consider a market where an informed monopolist sets the price for a good or asset with a value unknown to potential buyers. Upon observing the price, buyers may pay some cost for information about the value before deciding on purchases. Under a belief-restriction, which generalizes the idea of the Cho–Kreps ‘intuitive criterion’, we establish a version of the Grossman–Stiglitz Paradox: there is no separating equilibrium with fully revealing prices. Yet, we also resolve the paradox. There is a unique equilibrium, and as the cost of information becomes small, the equilibrium approaches the full information outcome and prices become perfectly revealing. (author's abstract)

Item Type: Article in Academic Journal
Status: Published
Date Deposited: 27 Jan 2015 08:52
Last Modified: 01 Apr 2016 14:16
URI: http://irihs.ihs.ac.at/id/eprint/2679

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