Random encounters and information diffusion about product quality

This paper explores how social interactions among consumers shape markets. In a two-country model, meet and exchange information about the quality of goods. As spreads, demand evolves, affecting prices quantities manufactured by profit-maximizing firms. We show that market with informational frictions reach duopoly price full at limit. However, this convergence can take different paths depending on size asymmetry between countries. particular, when country producing low-quality good is relatively large, single does not immediately turn into be temporarily trapped in situation instability where no Nash equilibrium pure (but only mixed) strategies exists fluctuate their monopoly levels. It follows classical price-reducing effects international trade may longer to appear. view an intense globalization process, understanding meetings affect outcomes critical for performance economic integration.