DP3256 Transparency, Prices and Welfare with Imperfect Substitutes

Author(s): Jan Boone, Jan Potters
Publication Date: March 2002
Keyword(s): prices, substitution, transparency
JEL(s): D40, L10
Programme Areas: Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=3256

Markets that are not completely transparent feature complex comparative statics with respect to the effect of number of firms, elasticity of substitution between goods and degree of transparency on equilibrium prices. The main result is that the following 'common wisdom' is incorrect: more transparent markets always feature lower prices, higher consumer welfare and lower price dispersion.