The Dark Side of Competitive Pressure <link rel="stylesheet" typetext/css href="../toc/style.css"/> </head> <body> <table id="banner" width="100%" bgcolor="#FFFFFF" cellpadding="3" summary="t1"> <tbody> <tr> <td> <table width="100%" bgcolor="#3399CC" cellpadding="5" cellspacing="3" summary="banner"> <tbody> <tr> <td><p style="color: #ffffff;">The RAND Journal of Economics<br /> 1776 Main Street<br /> Santa Monica, CA 90401<br /> <br /> <br /> <p><a class="four" href="http://www.rje.org">Home</a> <a class="four" href="http://www.rje.org/contact.html">Contact Us</a> <a class="four" href="http://www.rje.org/search.html">Search</a></p></td> <td align="right" valign="top"> <h1>The RAND Journal<br /> of Economics</h1> </td> </tr> </tbody> </table> </td> </tr> <tr> <td> <table width="100%" bgcolor="#FFFFCC" summary="menu"> <tbody> <tr> <td class="one"><a class="one" href="http://www.blackwellpublishing.com/editors.asp?ref=0741-6261" target="new"> Editorial | </a> <a class="one" href="http://www.blackwellpublishing.com/journal.asp?ref=0741-6261&site=1" target="new">Forthcoming | </a><a class="one" href="/sup-mat.html">Supplementary Material | </a> <a class="one" href="https://editorialexpress.com/cgi-bin/rje_online.cgi?action=browse&tid=38330&sc=eQW1ucsi" target="new">Tables of Contents | </a><a class="one" href="http://www.blackwell-synergy.com/action/doUpdateAlertSettings?journalCode=RAND&action=addJournal" target="new">E-Table of Contents | </a><a class="one" href="/styleguide.html">Style Guide | </a><a class="one" href="/iolinks.html">IO Links </a></td> </tr> </tbody> </table> </td> </tr> </tbody> </table> <div class="navtrail"> <a href="/">RJE Home</a> </div> <div id="threecolumn"> <div id="leftcolumn"></div> <div id="rightcolumn"> <table width="100%" cellpadding="5" cellspacing="5" class="side_menu"> <tr> <td><a class="four" href="http://editorialexpress.com/rand" target="new">Online Submissions</a></td> </tr> <tr> <td><a class="four" href="/subs.html">Online Access</a></td> </tr> <tr> <td><a class="four" href="http://gemini.econ.umd.edu/cgi-bin/rje_online.cgi" target="new">Order PDFs</a></td> </tr> <tr> <td><a class="four" href="http://www.blackwellpublishing.com/subs.asp?ref=0741-6261" target="new">Subscribe/Renew</a></td> </tr> <tr> <td><a class="four" href="/nobel.html">Nobel Laureates</a></td> </tr>  </table> </div> <div id="content">  <h1> The Dark Side of Competitive Pressure <p></h1><hr> <strong>Volume:</strong> Volume 36, No. 2<p> <strong>Issue:</strong> Summer 2005<p> <strong>Pages: </strong>361-397 <p> <strong>Authors:</strong> Jason G. Cummins and Ingmar Nyman <p> <strong>Title:</strong> The Dark Side of Competitive Pressure <p> <strong>Abstract:</strong> When firms are better informed than their consumers---for example, in many service industries firms know more than their customers about the benefits of different alternatives---competitive pressure may inhibit efficiency because it forces firms to cater excessively to consumers' opinions. We develop this idea in a simple model of investment management in which agency problems are absent. We show that competitive pressure may prevent firms from using information that contradicts consumers' prior beliefs. In particular, the inefficiency occurs when the firms' informational advantage is small, and may, in fact, be exacerbated by making the consumer better informed. By contrast, the inefficiency shrinks with the number of firms. <p> <hr> <ul style="padding-bottom:8px; font-size:11px"> <li><a href="http:/cgi-bin/hmrp/rje-ice-form.pl"> Search Abstracts</a> <li><a href="http://gemini.econ.umd.edu/cgi-bin/rje_online.cgi">Order Back Issues or Articles</a></li> </ul> </div> </div>  <div id="footer" style="background: #ffffff; padding: 4px;" align="center"> <p style="font-size:10px;">Copyright © 2009 RAND Journal of Economics.</p> </div>   </div> </body></html>