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Transparency, price-dependent demand and product variety

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  • Gu, Yiquan
  • Wenzel, Tobias

Abstract

This paper revisits the relationship between transparency on the consumer side and product variety as analyzed in Schultz (2009). We identify two welfare effects of transparency. More transparency decreases price-cost margins which is beneficial forwelfare. On the other hand, more transparency reduces variety which can be positive or negative for welfare. Overall, more transparency is always welfareimproving.

Suggested Citation

  • Gu, Yiquan & Wenzel, Tobias, 2010. "Transparency, price-dependent demand and product variety," DICE Discussion Papers 04, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    • Handle: RePEc:zbw:dicedp:04
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    References listed on IDEAS

    as
    1. Schultz, Christian, 2005. "Transparency on the consumer side and tacit collusion," European Economic Review, Elsevier, vol. 49(2), pages 279-297, February.
    2. Varian, Hal R, 1980. "A Model of Sales," American Economic Review, American Economic Association, vol. 70(4), pages 651-659, September.
    3. Gu, Yiquan & Wenzel, Tobias, 2009. "A note on the excess entry theorem in spatial models with elastic demand," International Journal of Industrial Organization, Elsevier, vol. 27(5), pages 567-571, September.
    4. Schultz, Christian, 2009. "Transparency and product variety," Economics Letters, Elsevier, vol. 102(3), pages 165-168, March.
    5. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
    6. Gu Yiquan & Wenzel Tobias, 2012. "Price-Dependent Demand in Spatial Models," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 12(1), pages 1-26, March.
    7. Gu, Yiquan & Wenzel, Tobias, 2009. "Product Variety, Price Elasticity of Demand and Fixed Cost in Spatial Models," Ruhr Economic Papers 92, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
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    Citations

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    Cited by:

    1. Esteves, Rosa-Branca & Reggiani, Carlo, 2014. "Elasticity of demand and behaviour-based price discrimination," International Journal of Industrial Organization, Elsevier, vol. 32(C), pages 46-56.
    2. Gu, Yiquan & Wenzel, Tobias, 2012. "Transparency, entry, and productivity," Economics Letters, Elsevier, vol. 115(1), pages 7-10.
    3. Wan, Xing & Chen, Jing & Chen, Bintong, 2020. "Exploring service positioning in platform-based markets," International Journal of Production Economics, Elsevier, vol. 220(C).
    4. Fischer, Christian & Rasch, Alexander & Wenzel, Tobias, 2020. "Complex pricing and consumer-side attention," ZEW Discussion Papers 20-075, ZEW - Leibniz Centre for European Economic Research.
    5. Stühmeier Torben & Wenzel Tobias, 2012. "Regulating Advertising in the Presence of Public Service Broadcasting," Review of Network Economics, De Gruyter, vol. 11(2), pages 1-23, June.
    6. Clémence Christin, 2013. "Entry Deterrence Through Cooperative R&D Over-Investment," Recherches économiques de Louvain, De Boeck Université, vol. 79(2), pages 5-26.
    7. Xu, Lili & Matsumura, Toshihiro, 2023. "Market transparency in a mixed oligopoly," MPRA Paper 118415, University Library of Munich, Germany.
    8. Tong Zhang & Yixue Huo & Xin Zhang & Jie Shuai, 2019. "Endogenous third-degree price discrimination in Hotelling model with elastic demand," Journal of Economics, Springer, vol. 127(2), pages 125-145, July.
    9. Esteves, Rosa-Branca & Shuai, Jie, 2022. "Personalized pricing with a price sensitive demand," Economics Letters, Elsevier, vol. 213(C).
    10. Karakoç, Gülen & Pagnozzi, Marco & Piccolo, Salvatore, 2022. "The value of transparency in dynamic contracting with entry," International Journal of Industrial Organization, Elsevier, vol. 85(C).
    11. Fischer, Christian & Rasch, Alexander, 2018. "Complex pricing and consumer-side transparency," VfS Annual Conference 2018 (Freiburg, Breisgau): Digital Economy 181642, Verein für Socialpolitik / German Economic Association.
    12. Haucap, Justus & Herr, Annika & Frank, Björn, 2011. "In vino veritas: Theory and evidence on social drinking," DICE Discussion Papers 37, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    13. Schultz, Christian, 2014. "Consumer poaching, brand switching, and price transparency," Economics Letters, Elsevier, vol. 123(3), pages 266-269.
    14. Francisco Martínez Sánchez, 2016. "Collusion, Customization and Transparency," Working Papers. Serie AD 2016-03, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).

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    More about this item

    Keywords

    Market Transparency; Product Variety; Salop Model;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General

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