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Asymmetric Information Flows in Customer Markets


Sibly, HA, Asymmetric Information Flows in Customer Markets, Bulletin of Economic Research, 44, (4) pp. 323-341. ISSN 0307-3378 (1992) [Refereed Article]

DOI: doi:10.1111/j.1467-8586.1992.tb00550.x


In customer markets an information asymmetry exists between a firm's current customers and prospective customers. When a firm changes its price, current customers are instantly aware of the price change, while potential customers are informed slowly of the change. The paper explicitly models this information imperfection and the associated asymmetry in firms' customer flows. The main result of the paper is that, because of the information asymmetry, there will be a range of marginal cost and demand over which the firm has no incentive to change price. It is also shown that prices will be more upwardly flexible than downwardly flexible. The size of the range, and the extent of downward price inflexibility, depends on the rate at which information is transmitted to customers. Copyright © 1992, Wiley Blackwell. All rights reserved

Item Details

Item Type:Refereed Article
Research Division:Economics
Research Group:Economic theory
Research Field:Economic theory not elsewhere classified
Objective Division:Economic Framework
Objective Group:Microeconomics
Objective Field:Industrial organisations
UTAS Author:Sibly, HA (Dr Hugh Sibly)
ID Code:35391
Year Published:1992
Deposited By:Economics and Finance
Deposited On:2005-08-09
Last Modified:2011-09-27

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