Countervailing Power and Price Transparency

14 Pages Posted: 2 Nov 2006

See all articles by Morten Hviid

Morten Hviid

University of East Anglia - Centre for Competition Policy (CCP); University of East Anglia (UEA) - Norwich Law School

H. Peter Mollgaard

Copenhagen Business School-Economics

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.

Suggested Citation

Hviid, Morten and Mollgaard, Hans Peter, Countervailing Power and Price Transparency. Scandinavian Journal of Economics, Vol. 108, No. 3, pp. 499-512, October 2006, Available at SSRN: https://ssrn.com/abstract=941859 or http://dx.doi.org/10.1111/j.1467-9442.2006.00468.x

Morten Hviid (Contact Author)

University of East Anglia - Centre for Competition Policy (CCP) ( email )

UEA
Norwich Research Park
Norwich, Norfolk NR47TJ
United Kingdom

University of East Anglia (UEA) - Norwich Law School ( email )

Norwich NR4 7TJ, Norfolk
United Kingdom

Hans Peter Mollgaard

Copenhagen Business School-Economics ( email )

Kilevej 14
Frederiksberg C, Select a state DK-2000
Denmark
+45-3815 20202 (Phone)
+4521622015 (Fax)

HOME PAGE: http://www.cbs.dk/staff/petermollgaard/

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