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Title: Strategic Pricing, Signalling and Costly Information Acquisition

Author(s): Helmut Bester and Klaus Ritzberger

Publication Date: December 1998

Keyword(s): information acquisition, price signalling and quality uncertainty

Programme Area(s): Financial Economics

Abstract: Consider a market where an informed monopolist sets the price for a good or asset with a value unknown to potential buyers. Upon observing the price, buyers may pay some cost for information about the value before deciding on purchases. To restrict buyer beliefs we generalize the idea of the Cho-Kreps 'intuitive criterion'. Then there is no separating equilibrium with fully revealing prices. Yet, as the cost of information acquisition becomes small, the equilibrium approaches the full information outcome and prices become perfectly revealing.

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Bibliographic Reference

Bester, H and Ritzberger, K. 1998. 'Strategic Pricing, Signalling and Costly Information Acquisition'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=2032