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Quality over-provision of information goods

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  • Xiaopeng Xu

    (University of California-Berkeley)

Abstract

This paper studies a producer's quality choice of an information good. The marginal cost of quality provision for the good is decreasing. The buyer does not observe the actual quality but can learn a signal which is the sum of quality and a noise. It shows that the producer has an incentive to over-supply quality. Moreover, and interestly, all types of producer may over-supply quality.

Suggested Citation

  • Xiaopeng Xu, 2002. "Quality over-provision of information goods," Economics Bulletin, AccessEcon, vol. 12(5), pages 1-9.
    • Handle: RePEc:ebl:ecbull:eb-02l10001
    as

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    References listed on IDEAS

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    More about this item

    Keywords

    Information goods;

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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