Strategic Pricing, Signalling, and Costly Information Acquisition

Abstract: Consider a market where an informed monopolist sets the price for a good or as set 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.

Keywords: quality uncertainty; price signalling; information acquisition (search for similar items in EconPapers)
JEL-codes: C72 D42 D82 G14 (search for similar items in EconPapers)
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Related works:
Journal Article: Strategic pricing, signalling, and costly information acquisition (2001)
Working Paper: Strategic Pricing, Signalling and Costly Information Acquisition (1998)
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