In imperfectly competitive markets, incentives for the acquisition and dissemination of information by prices is significantly affected by strategic considerations. Since prices reveal information, firms possessing market power may choose to set prices which are either biased or not adjusted to all available information so as to distort their information content. Even when information is costlessly available strategic considerations may lead firms to remain uninformed. These results are illustrated in a simple Stackelberg model with price-setting firms where the pricing game is preceded by an information acquisition game.
|Number of pages||13|
|Publication status||Published - 1994|