Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

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Friday, December 17, 2010

The Inefficiency of Market Transparency – A Model with Endogenous Entry

Posted by D. Daniel Sokol

Yiquan Gu and Burkhard Hehenkamp explain The Inefficiency of Market Transparency – A Model with Endogenous Entry.

ABSTRACT: Including the entry decision in a Bertrand model with imperfectly informed consumers, we introduce a trade-off at the level of social welfare. On the one hand, market transparency is beneficial when the number of firms is exogenously given. On the other, a higher degree of market transparency implies lower profits and hence makes it less attractive to enter the market in the first place. It turns out that the second effect dominates: too much market transparency has a detrimental effect on consumer surplus and on social welfare. 

http://lawprofessors.typepad.com/antitrustprof_blog/2010/12/the-inefficiency-of-market-transparency-a-model-with-endogenous-entry.html

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