A Note on the Consumer Benefits of Information

Two recent articles in this Journal provide contradictory findings on the benefits of consumer information. Brenda J. Cude tried a variety of measures of benefit, none of which appears as systematic as Scott Maynes’ distance from the efficiency frontier, but all of which suggest very large gains from better information. Experimental studies by Merle D. Faminow and Bruce L. Benson, on the other hand, suggest that posted prices lead to higher average prices and profits, presumably by allowing signalling among sellers and reducing their uncertainty.2 I suggest that both findings are misleading if not incorrect. The experiments were in a duopoly framework where implicit collusion is relatively easy to induce and in a product area where margins are small anyway. Perhaps hidden-price-discounting sometimes persists more than advertised bargains, but experiments with a greater number of sellers would be more persuasive. None of the Cude estimates of the benefits from best buys is so neatly quantitative as adding the departures from a Maynes efficiency frontier, since that might be thought of as the aggregate benefit. My problem is identifying from whence these benefits are to come. The average profit level in retailing is far below any of these estimates. Are there other monopoly rents that can be captured? Surely not in the rented space of the retailers, since other kinds of businesses compete for that space. Can one describe a process by which a new equilibrium is established with lower consumer prices? Does one drive out half the retailers and double the volume of the