Document Type
Article
Publication Date
1985
Abstract
We analyze the role of information for price and output adjustment when competitive firms with rational expectations cannot directly distinguish between industrywide and firm-specific cost disturbances. Firms may become informed about industrywide cost conditions by acquiring information at a cost. The sensitivity of price and output to cost disturbances decreases as more firms choose to purchase information. The equilibrium industry share of informed firms increases as the cost of information falls and total cost variability increases. The equilibrium share of informed firms is largest when there is a comparable degree of variability in both industrywide and firm-specific costs.
Recommended Citation
Glick, Reuven, and Clas Wihlborg. "Price determination in a competitive industry with costly information and a production lag." The Rand Journal of Economics (1985): 127-140.
Peer Reviewed
1
Copyright
Rand Corporation
Included in
Business Administration, Management, and Operations Commons, Economic Theory Commons, Industrial Organization Commons, Organizational Behavior and Theory Commons
Comments
This article was originally published in The Rand Journal of Economics in 1985.