Working Paper: CEPR ID: DP3256
Authors: Jan Boone; Jan Potters
Abstract: Markets that are not completely transparent feature complex comparative statics with respect to the effect of number of firms, elasticity of substitution between goods and degree of transparency on equilibrium prices. The main result is that the following 'common wisdom' is incorrect: more transparent markets always feature lower prices, higher consumer welfare and lower price dispersion.
Keywords: prices; substitution; transparency
JEL Codes: D40; L10
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| market transparency (G14) | equilibrium prices (D41) |
| market transparency (G14) | consumer welfare (D69) |
| market transparency (G14) | price dispersion (L11) |
| number of firms (L20) | equilibrium prices (D41) |
| elasticity of substitution (D11) | equilibrium prices (D41) |
| degree of transparency (G38) | equilibrium prices (D41) |
| market transparency (G14) | competition (L13) |
| competition (L13) | price-setting behavior (L11) |
| price-setting behavior (L11) | equilibrium prices (D41) |
| market transparency (G14) | higher prices (D49) |
| market transparency (G14) | greater price dispersion (D49) |