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Noisy Signaling in Monopoly

Leonard J. Mirman

affiliation not provided to SSRN; University of Virginia - Department of Economics

Egas M. Salgueiro

Universidade de Aveiro, S.A.G.E.I.

Marc Santugini

University of Virginia - Department of Economics

May 29, 2013

We study the informational role of prices in a stochastic environment. We provide a closed-form solution of the monopoly problem when the price imperfectly signals quality to the uninformed buyers. We then study the effect of noise on output, market price, information flows, and expected profits. The presence of noise may reduce the informational externality due to asymmetric information, which increases the firm's expected profits.

Number of Pages in PDF File: 18

Keywords: Asymmetric information, Learning, Monopoly, Noise, Quality, Rational Expectations, Signaling

JEL Classification: D21, D42, D82, D83, D84, L12, L15

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Date posted: February 25, 2011 ; Last revised: May 29, 2013

Suggested Citation

Mirman, Leonard J. and Salgueiro, Egas M. and Santugini, Marc, Noisy Signaling in Monopoly (May 29, 2013). Available at SSRN: http://ssrn.com/abstract=1769003 or http://dx.doi.org/10.2139/ssrn.1769003

Contact Information

Leonard J. Mirman
University of Virginia - Department of Economics ( email )
1818 Winston Rd
Charlottesville, VA
United States
affiliation not provided to SSRN
Egas Manuel Da Silva Salgueiro
Universidade de Aveiro, S.A.G.E.I. ( email )
Marc Santugini (Contact Author)
University of Virginia - Department of Economics ( email )
P.O. Box 400182
Charlottesville, VA 22904-4182
United States
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