A note on welfare-improving ignorance about quality

Anthony Creane

doi:10.1007/s00199-007-0204-0

A note on welfare-improving ignorance about quality

Anthony Creane

Economics

Research output: Contribution to journal › Article › peer-review

3 Scopus citations

Abstract

Consider a monopolist that is selling a high quality product when the quality is unknown to a fraction of the consumers. If the quality cannot be signaled and the fraction is sufficiently large, then the monopolist will offer a low price to induce uninformed consumers to buy. If the fraction is sufficiently small, then uninformed consumers are irrelevant to its optimal price. If the uninformed consumers are priced out of the market as a result, then welfare can decrease.

Original language	English
Pages (from-to)	585-590
Number of pages	6
Journal	Economic Theory
Volume	34
Issue number	3
DOIs	https://doi.org/10.1007/s00199-007-0204-0
State	Published - Mar 2008

Keywords

Asymmetric information
Learning
Quality

ASJC Scopus subject areas

Economics and Econometrics

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10.1007/s00199-007-0204-0

Cite this

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AB - Consider a monopolist that is selling a high quality product when the quality is unknown to a fraction of the consumers. If the quality cannot be signaled and the fraction is sufficiently large, then the monopolist will offer a low price to induce uninformed consumers to buy. If the fraction is sufficiently small, then uninformed consumers are irrelevant to its optimal price. If the uninformed consumers are priced out of the market as a result, then welfare can decrease.

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A note on welfare-improving ignorance about quality

Abstract

Keywords

ASJC Scopus subject areas

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