Information generation in vertically differentiated markets
Information generation in vertically differentiated markets
In a model of vertical competition two firms draw costly public signals that are informative about the quality of their products and then competitively set prices. When each firm generates information independently from the other, there will be overinvestment (underinvestment) in information generation if the market share of the quality follower in the subsequent market equilibrium is high (low). Moreover, information generation by one firm has a positive externality on the other firm. Hence, 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.
Gall, Thomas
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Canidio, Andrea
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Gall, Thomas
8df67f3d-fe3c-4a3f-8ce7-e2090557fcd4
Canidio, Andrea
a4e8d96b-a879-4fb4-a661-d7fb9e3754ff
Gall, Thomas and Canidio, Andrea
(2023)
Information generation in vertically differentiated markets.
Journal of Industrial Economics.
(doi:10.1111/joie.12344).
Abstract
In a model of vertical competition two firms draw costly public signals that are informative about the quality of their products and then competitively set prices. When each firm generates information independently from the other, there will be overinvestment (underinvestment) in information generation if the market share of the quality follower in the subsequent market equilibrium is high (low). Moreover, information generation by one firm has a positive externality on the other firm. Hence, 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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CanidioGall2022
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CanidioGall2023
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Accepted/In Press date: 23 September 2023
e-pub ahead of print date: 16 October 2023
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© 2023 The Editorial Board of The Journal of Industrial Economics and John Wiley & Sons Ltd.
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Local EPrints ID: 475644
URI: http://eprints.soton.ac.uk/id/eprint/475644
ISSN: 0022-1821
PURE UUID: 601b382f-9cf6-4be0-89db-7b51737fd10a
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Date deposited: 23 Mar 2023 17:40
Last modified: 06 Jun 2024 01:51
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Author:
Andrea Canidio
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