ABSTRACT
IN THE last chapter, we discussed restricted competition and the price maker’s behavior under restricted competition from a general point of view and without regard to the particular factor or factors which restrain the entry of newcomers and create the conditions of restricted competition. We were able to do so because the aspects of the price maker’s behavior which we discussed there remain the same whatever the factor that restrains competition. When, however, competition is restricted by the uninformed nature of the market, the price maker’s behavior and the nature of restricted competition assume additional aspects; and these will be discussed in the following. In particular, we shall show, first of all, that in the uninformed market there is a tendency for competing products to become similar to each other; second, that advertising assumes special importance in the uninformed market and contributes to keeping the market uninformed; and finally, that prices tend to become an index of quality in such markets, which in turn often leads to price discrimination. In this connection, we shall also present a general discussion of the principles of price discrimination.
