Lecture9_Info - INTRO QUALITY INFORMATION PRICE INFORMATION...

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Unformatted text preview: INTRO QUALITY INFORMATION PRICE INFORMATION I NDUSTRIAL ORGANISATION (2011) T OPIC 9: I NFORMATION Nicolas de Roos 1 1 Discipline of Economics University of Sydney INDUSTRIAL ORGANISATION (2011) TOPIC 9: INFORMATION INTRO QUALITY INFORMATION PRICE INFORMATION O UTLINE INTRODUCTION LIMITED QUALITY INFORMATION Information asymmetries The takeover game Lemons LIMITED PRICE INFORMATION Tourist traps Tourists and natives INDUSTRIAL ORGANISATION (2011) TOPIC 9: INFORMATION INTRO QUALITY INFORMATION PRICE INFORMATION I NTRODUCTION What information is limited? firm locations product quality prices Why is information limited? not all information is accurate it is costly to collect information consumers may forget information is difficult to process INDUSTRIAL ORGANISATION (2011) TOPIC 9: INFORMATION INTRO QUALITY INFORMATION PRICE INFORMATION O UTLINE INTRODUCTION LIMITED QUALITY INFORMATION Information asymmetries The takeover game Lemons LIMITED PRICE INFORMATION Tourist traps Tourists and natives INDUSTRIAL ORGANISATION (2011) TOPIC 9: INFORMATION INTRO QUALITY INFORMATION PRICE INFORMATION A SYMMETRIC INFORMATION Asymmetric information I know more than you do Adverse selection I know my type, but you dont ... and I may exploit this information to my advantage Moral hazard I observe my actions, but you dont ... and this may be costly for you INDUSTRIAL ORGANISATION (2011) TOPIC 9: INFORMATION INTRO QUALITY INFORMATION PRICE INFORMATION L ET S PLAY A GAME ! Your firm is considering buying another firm with your management expertise, you will add 50% to the value of the firm the current value of the firm is known to existing management all you know is the value is an integer v between 0 and 100 (inclusive) each value is equally likely INDUSTRIAL ORGANISATION (2011) TOPIC 9: INFORMATION INTRO QUALITY INFORMATION PRICE INFORMATION I NSTRUCTIONS The game write down a bid for the firm the firm will accept your bid if it is greater than the value of...
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Lecture9_Info - INTRO QUALITY INFORMATION PRICE INFORMATION...

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