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The value of public information in vertically differentiated markets

The value of public information in vertically differentiated markets
The value of public information in vertically differentiated markets
Generating public information about vertically differentiated products increases expected vertical differentiation and softens competition. We show that this will induce firms to overinvest (underinvest) in information generation, if the deadweight loss in the subsequent market equilibrium is high (low). Moreover, information generation by one firm has a positive externality on the other firm. It follows that coordination (e.g. via industry associations) increases information generation. When product qualities are endogenous, information generation may prevent quality degradation and thus have an additional social benefit.
University of Southampton
Canidio, Andrea
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Gall, Thomas
8df67f3d-fe3c-4a3f-8ce7-e2090557fcd4
Canidio, Andrea
a4e8d96b-a879-4fb4-a661-d7fb9e3754ff
Gall, Thomas
8df67f3d-fe3c-4a3f-8ce7-e2090557fcd4

Canidio, Andrea and Gall, Thomas (2019) The value of public information in vertically differentiated markets Southampton. University of Southampton 46pp.

Record type: Monograph (Discussion Paper)

Abstract

Generating public information about vertically differentiated products increases expected vertical differentiation and softens competition. We show that this will induce firms to overinvest (underinvest) in information generation, if the deadweight loss in the subsequent market equilibrium is high (low). Moreover, information generation by one firm has a positive externality on the other firm. It follows that coordination (e.g. via industry associations) increases information generation. When product qualities are endogenous, information generation may prevent quality degradation and thus have an additional social benefit.

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e-pub ahead of print date: 24 April 2019

Identifiers

Local EPrints ID: 430297
URI: https://eprints.soton.ac.uk/id/eprint/430297
PURE UUID: 5b3f6504-297b-4091-a0c9-6526b976604d

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Date deposited: 25 Apr 2019 16:30
Last modified: 29 Apr 2019 16:30

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Contributors

Author: Andrea Canidio
Author: Thomas Gall

University divisions

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