When the truth hurts: ordinary selling price regulation in a monopoly

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dc.contributor.advisorHollis, Aidan
dc.contributor.authorSahragardjooneghani, Babak
dc.contributor.committeememberBeall, Reed
dc.contributor.committeememberMigrow, Dimitri
dc.date2021-06
dc.date.accessioned2021-05-18T18:23:26Z
dc.date.available2021-05-18T18:23:26Z
dc.date.issued2021-05-13
dc.description.abstractHow does restricting firms to communicate a truthful ordinary selling price affect pricing and profits when some consumers are uncertain about product quality? In this thesis we analyze a two-period monopoly model to study the welfare effect of ordinary selling price (OSP) regulation. In the model, quality is observed by informed consumers who buy in the first period. However, consumers who arrive in market in the second period are not able to discern quality, but must infer it indirectly through prices. We first characterize the necessary conditions for OSP regulation to make the first-period price informative for second-period consumers. We show that OSP regulation has no effect when the proportion of uninformed consumers is high. This means regulation is ineffective when it would be most useful. We then compare the equilibrium outcome when OSP is effective to the equilibrium outcome in an unregulated environment. A simple welfare measure indicates that restricting firms to communicate a truthful first-period price has no effect on the uninformed consumers' expected surplus, but does create a deadweight loss from deceptive pricing in the first period. This deceptive pricing occurs because OSP regulations provide incentives for a low-quality firm to charge a high initial price when doing so enables it to earn excess profits in the second period.en_US
dc.identifier.citationSahragardjooneghani, B. (2021). When the truth hurts: ordinary selling price regulation in a monopoly (Master's thesis, University of Calgary, Calgary, Canada). Retrieved from https://prism.ucalgary.ca.en_US
dc.identifier.doihttp://dx.doi.org/10.11575/PRISM/38883
dc.identifier.urihttp://hdl.handle.net/1880/113436
dc.language.isoengen_US
dc.publisher.facultyArtsen_US
dc.publisher.institutionUniversity of Calgaryen
dc.rightsUniversity of Calgary graduate students retain copyright ownership and moral rights for their thesis. You may use this material in any way that is permitted by the Copyright Act or through licensing that has been assigned to the document. For uses that are not allowable under copyright legislation or licensing, you are required to seek permission.en_US
dc.subjectSignalingen_US
dc.subjectMonopolyen_US
dc.subjectOrdinary selling priceen_US
dc.subjectRegulationen_US
dc.subject.classificationEconomicsen_US
dc.titleWhen the truth hurts: ordinary selling price regulation in a monopolyen_US
dc.typemaster thesisen_US
thesis.degree.disciplineEconomicsen_US
thesis.degree.grantorUniversity of Calgaryen_US
thesis.degree.nameMaster of Arts (MA)en_US
ucalgary.item.requestcopytrueen_US
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