Why Market Shares Matter: An Information-Based Theory
Consider a duopoly market in which consumers have heterogeneous information about the quality differential q of the two goods. When firms are ignorant about q, consumers rationally believe that a firm with high market shares is likely to produce a high-quality good. As a result, firms try to signal-jam the inferences of consumers and compete for market shares beyond the level explained by short-run profit maximization. When firms know q, multiple equilibria may exist, but there is always one equilibrium in which market shares signal quality, and then the market tends to be more competitive.
Year of publication: |
1996
|
---|---|
Authors: | Caminal, Ramon ; Vives, Xavier |
Published in: |
RAND Journal of Economics. - The RAND Corporation, ISSN 0741-6261. - Vol. 27.1996, 2, p. 221-239
|
Publisher: |
The RAND Corporation |
Saved in:
Online Resource
Saved in favorites
Similar items by person
-
Why Market Shares Matter : An Information-Based Theory
Caminal, Ramon, (2008)
-
Why Market Shares Matter: An Information-Based Theory
Caminal, Ramon, (1996)
-
Price Dynamics and Consumer Learning
Caminal, Ramon, (1999)
- More ...