Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/97228 
Year of Publication: 
2013
Series/Report no.: 
Center for Mathematical Economics Working Papers No. 487
Publisher: 
Bielefeld University, Center for Mathematical Economics (IMW), Bielefeld
Abstract: 
I analyze a monopolistic model of quality uncertainty but with the possibility of information acquisition on the consumer side. Information is costly and its amount is chosen by the consumer. The analysis of Bayesian equilibria shows the possibility of three equilibrium classes, only one of which leaves positive utility to the consumer. The classic adverse selection results of these markets are weakened in this situation. I show that cheaper information does not necessarily benefit the consumer but can instead rule out the buyer-friendly and welfare maximizing equilibria. Moreover, making quality search arbitrarily efficient does not lead to sure selling of the high quality product. A sustainable adverse selection effect, though weaker than in the classical model, remains even in the limit.
Document Type: 
Working Paper

Files in This Item:
File
Size
789.22 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.