Prices, product qualities and asymmetric information: The competitive case

Russell Cooper, Thomas W. Ross

Research output: Contribution to journalArticlepeer-review

79 Scopus citations

Abstract

Recent developments in the economics of information emphasize the informational content of prices. We examine the degree to which prices convey information on product quality to uninformed agents. Under perfect competition, we show that a rational expectations equilibrium may not exist. When an equilibrium does exist, the information on quality conveyed by prices depends on the shape of the average cost curves and the relative numbers of informed and uniformed agents.

Original languageEnglish (US)
Pages (from-to)197-207
Number of pages11
JournalReview of Economic Studies
Volume51
Issue number2
DOIs
StatePublished - Apr 1984

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

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