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Information asymmetry and search intensity

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  • Atayev, Atabek

Abstract

In markets where sellers' marginal costs of production have a common component, they have informational advantage over buyers regarding those costs. This information asymmetry between sellers and buyers is especially relevant in markets where buyers have to uncover prices through costly search. We propose a theoretical model of simultaneous search that accounts for such information asymmetry. Our main finding is that informing buyers about marginal costs may harm them by deterring search and, hence, softening competition. This result has important implications on policy regulations and voluntary information sharing.

Suggested Citation

  • Atayev, Atabek, 2023. "Information asymmetry and search intensity," ZEW Discussion Papers 23-043, ZEW - Leibniz Centre for European Economic Research.
    • Handle: RePEc:zbw:zewdip:279810
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    References listed on IDEAS

    as
    1. Fershtman, Chaim & Fishman, Arthur, 1992. "Price Cycles and Booms: Dynamic Search Equilibrium," American Economic Review, American Economic Association, vol. 82(5), pages 1221-1233, December.
    2. José L Moraga-González & Zsolt Sándor & Matthijs R Wildenbeest, 2021. "Simultaneous Search for Differentiated Products: The Impact of Search Costs and Firm Prominence," The Economic Journal, Royal Economic Society, vol. 131(635), pages 1308-1330.
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    More about this item

    Keywords

    Information Asymmetry; Consumer Search; Price Competition;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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