Abstract
This paper analyzes a market with multiple sellers and horizontally differentiated products. We investigate the sellers’ incentives to reveal product relevant information that affects the buyer’s private valuation. The main finding is that if the number of sellers is sufficiently large, there is a unique symmetric equilibrium with full information disclosure. Thus, unlike the results by Lewis and Sappington (Int Econ Rev 35:309–327, 1994) and Johnson and Myatt (Am Econ Rev 93:756–784, 2006) for monopoly, which state that the monopolist reveals either full information or no information, intense competition results in a single extreme with respect to information disclosure. We show that the market is always inefficient, but the magnitude of inefficiency converges to zero at a high rate as competition intensifies.
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I am grateful to Kalyan Chatterjee, Andrei Karavaev, René Kirkegaard, Vijay Krishna, Fernando Leiva, Marco Ottaviani, Marek Pycia, Lixin Ye, and seminar participants at the University of Pittsburgh and Brock University for helpful comments. I also owe special thanks to two anonymous referees and the Associate Editor for their suggestions. Misty Ann Stone provided invaluable help with copy editing the manuscript. This work was partially supported by SSHRC Standard Research Grant 410-2010-1776.
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Ivanov, M. Information revelation in competitive markets. Econ Theory 52, 337–365 (2013). https://doi.org/10.1007/s00199-011-0629-3
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DOI: https://doi.org/10.1007/s00199-011-0629-3