Information Provision and Price Competition

Two sellers with ex-ante identical products, whose qualities can be either high or low, first choose a binary information structure, modeled as the probability that the signal reveals the state. After the buyer independently draws one private signal from each information structure, the sellers then each choose a price in the second stage. We identify two equilibria in information structures, a symmetric equilibrium with two perfectly informative structures, and an asymmetric equilibrium with one perfectly informative structure and one completely uninformative structure. The symmetric equilibrium is efficient while the asymmetric equilibrium is not, but the latter generates a greater revenue to the sellers because price competition is less fierce due to a greater quality difference when they compete.