DP3256 Transparency, Prices and Welfare with Imperfect Substitutes

• Jan Boone Jan Potters
20 Mar 2002

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.