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Noisy Signaling in Monopoly

18 Pages Posted: 25 Feb 2011 Last revised: 29 May 2013

Leonard J. Mirman

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

Multiple version iconThere are 2 versions of this paper

Date Written: May 29, 2013

Abstract

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.

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

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

Suggested Citation

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

Leonard J. Mirman

University of Virginia - Department of Economics ( email )

1818 Winston Rd
Charlottesville, VA
United States

Egas Manuel Da Silva Salgueiro

Universidade de Aveiro, S.A.G.E.I. ( email )

3810-Aveiro
Portugal

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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