Countervailing power and price transparency

Morten Hviid, Hans Peter Møllgaard

Research output: Contribution to journalArticleAcademicpeer-review

Abstract

We investigate whether improved transparency about prices may increase the countervailing power exercised by buyers of an intermediate good. In a model with an informed manufacturer that sells to both informed and uninformed firms, we show that full transparency cannot be part of equilibrium due to the strategic effect of the resulting informational spillover. Transparency policies introduce a distortion for informed segments and are unsuccessful in completely removing the distortion from the uninformed segment. Welfare effects are hence ambiguous and depend on the weight assigned to uninformed markets. Our results thus cast further doubt on the value of transparency.
Original languageEnglish
Pages (from-to)499-512
Number of pages14
JournalScandinavian Journal of Economics
Volume108
Issue number3
DOIs
Publication statusPublished - 2006
Externally publishedYes

Keywords

  • Pristeori

Cite this