Information Induced Markups (joint with Jacob Granqvist and Mohammad Naderitabar)

When faced with consumption decisions, consumers often do not have perfect information about the quality of the different goods at their disposal. Some goods might be more well known than others, reducing the uncertainty about their quality. Firms are aware that the signal that consumers receive about their product might be noisy and that this will affect the consumption decision. In this paper, we propose a way of modeling how information noise can create market power and firm incentives to invest in information precision.