ABSTRACT
Since the pioneering studies of information economics by Scitovsky [13] and Stigler [14] it has been recognized that fi rms supply only a limited amount of product information and consumers search out only a subset of the available brands of a given commodity. This result of non-negligible, increasing information costs means that consumers have only partial knowledge of market prices and brand characteristics. The residual ignorance in turn implies that prices need not adjust at the margin to equalize actual differences (or nondifferences) in brand quality. The literature has thus come to the understanding that, when product information is costly, some form of monopoly is the proper model of markets and not competition.
