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a policy makers view

Tjalling de Vries Ministry of Economic Affairs. Transparency, prices and consumer welfare. a policy makers view. ENCORE workshop June 5, 2003. Main points Boone & Potters. Usual belief in the benefits of increasing transparency does not hold in all situations.

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a policy makers view

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  1. Tjalling de Vries Ministry of Economic Affairs Transparency, prices and consumer welfare a policy makers view ENCORE workshop June 5, 2003

  2. Main points Boone & Potters • Usual belief in the benefits of increasing transparency does not hold in all situations. • Competition effect: perfect substitutes, constant return to scale.Demand effect: imperfect substitutes, decreasing return to scale • Demand effect can dominate Competition effect • More transparency increases price dispersion

  3. Opinion • Still, in most markets an increase in transparency leads to better competition and to better results. • However I agree, under certain conditions an increase in transparency does not necessarily lead to lower prices and more consumer welfare. • But how convincing are the examples Jan Boone uses to prove his argument? • And should the results of the demand effect always be viewed as ‘bad’ results?

  4. Examples • Introduction of the Internet: - the second hand car • Institutional supply constraints: - the secondopinion

  5. Questions • What’s the impact of the described demand effect? • Bottom-line: consumer welfare or social welfare? • Market conditions causing collusion effect (Møllgaard) vs demand effect (Boone)? • Increase in price dispersion vs transition period for changing markets?

  6. How can I explain this: Consumer s’utility functions= and To

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