Information Acquisition and Diffusion in Markets
- Author(s)
- Maarten Janssen, Atabek Atayev
- Abstract
Consumers acquire information through their own search efforts or through word-of-mouth communication within their social network. Information diffusion leads to free-riding and less active search. Free-riding consumers also create important positive externalities, however, as they are more likely to compare prices, imposing competitive pressure on firms. We show how market prices depend on network characteristics and search cost. For example, if search cost becomes small, price dispersion disappears, while prices converge to the monopoly level, with expected prices decreasing for small search cost. Prices are lower in societies with more connections, while price dispersion remains even in fully connected societies.
- Organisation(s)
- Department of Economics
- External organisation(s)
- ZEW – Leibniz Centre for European Economic Research
- Journal
- International Economic Review
- Volume
- 65
- Pages
- 729-753
- No. of pages
- 25
- ISSN
- 0020-6598
- DOI
- https://doi.org/10.1111/iere.12672
- Publication date
- 05-2024
- Peer reviewed
- Yes
- Austrian Fields of Science 2012
- 502021 Microeconomics
- ASJC Scopus subject areas
- Economics and Econometrics
- Portal url
- https://ucrisportal.univie.ac.at/en/publications/196ada71-beef-4abf-84d6-127411483e89