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Information externalities in a model of sales

Author

Listed:
  • Martin Sefton

    (School of Economics, University of Nottingham)

  • John Morgan

    (Woodrow Wilson School, Princeton University)

Abstract

We anlayze Varian's (1980) Model of Sales, and show that when the number of uninformed consumers increases, prices become less competitive for all consumers. Thus, the influx of uninformed consumers generates a negative externality increasing the prices paid by informed consumers.

Suggested Citation

  • Martin Sefton & John Morgan, 2001. "Information externalities in a model of sales," Economics Bulletin, AccessEcon, vol. 4(7), pages 1-5.
    • Handle: RePEc:ebl:ecbull:eb-01d00003
    as

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    File URL: http://www.accessecon.com/pubs/EB/2001/Volume4/EB-01D00003A.pdf
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    References listed on IDEAS

    as
    1. Varian, Hal R, 1980. "A Model of Sales," American Economic Review, American Economic Association, vol. 70(4), pages 651-659, September.
    2. repec:bla:germec:v:1:y:2000:i:2:p:187-220 is not listed on IDEAS
    3. Villas-Boas, J Miguel, 1995. "Models of Competitive Price Promotions: Some Empirical Evidence from the Coffee and Saltine Crackers Markets," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 4(1), pages 85-107, Spring.
    4. repec:bla:germec:v:1:y:2000:i:2:p:221-240 is not listed on IDEAS
    5. Michael R. Baye & John Morgan, 2001. "Information Gatekeepers on the Internet and the Competitiveness of Homogeneous Product Markets," American Economic Review, American Economic Association, vol. 91(3), pages 454-474, June.
    6. Morgan, John & Orzen, Henrik & Sefton, Martin, 2006. "An experimental study of price dispersion," Games and Economic Behavior, Elsevier, vol. 54(1), pages 134-158, January.
    7. Varian, Hal R, 1981. "A Model of Sales: Errata," American Economic Review, American Economic Association, vol. 71(3), pages 517-517, June.
    8. N/A, 1981. "Errata," Journal of Peace Research, Peace Research Institute Oslo, vol. 18(3), pages 307-307, September.
    9. Burdett, Kenneth & Judd, Kenneth L, 1983. "Equilibrium Price Dispersion," Econometrica, Econometric Society, vol. 51(4), pages 955-969, July.
    10. Michael R. Baye & John Morgan & Patrick Scholten, 2004. "Price Dispersion In The Small And In The Large: Evidence From An Internet Price Comparison Site," Journal of Industrial Economics, Wiley Blackwell, vol. 52(4), pages 463-496, December.
    11. N/A, 1981. "Errata," Sociological Methods & Research, , vol. 9(3), pages 389-390, February.
    12. Maarten C.W. Janssen & Jose Luis Moraga, 2000. "Pricing, Consumer Search and the Size of Internet Markets," Tinbergen Institute Discussion Papers 00-042/1, Tinbergen Institute.
    13. repec:bla:jemstr:v:4:y:1995:i:1:p:85-107:a is not listed on IDEAS
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    Cited by:

    1. Il-Horn Hann & Kai-Lung Hui & Sang-Yong Tom Lee & Ivan P.L. Png, 2005. "Sales and Promotions: A More General Model," Industrial Organization 0508014, University Library of Munich, Germany.
    2. Ilukor, John & Birner, Regina, 2013. "Veterinarians, Paraprofessionals, Farmers and the Quality of Clinical Veterinary Services: A role play experiment," 2013 Fourth International Conference, September 22-25, 2013, Hammamet, Tunisia 160476, African Association of Agricultural Economists (AAAE).
    3. Bernd Jost, 2012. "Price Dispersion, Search Costs and Spatial Competition: Evidence from the Austrian Retail Gasoline Market," NEURUS papers neurusp166, NEURUS - Network of European and US Regional and Urban Studies.
    4. Ilukor, John & Birner, Regina, 2015. "Do Veterinary Paraprofessionals Provide Quality Clinical Veterinary Services for Cattle? Results from a Role Play Experiment in Rural Uganda," 2015 Conference, August 9-14, 2015, Milan, Italy 211781, International Association of Agricultural Economists.

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    JEL classification:

    • D0 - Microeconomics - - General

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