The effect of information on the well-being of the uninformed: what's the chance of getting a decent meal in an unfamiliar city?

We consider a market in which some consumers are fully informed about the q uality of a product sold by different firms, while other consumers are unin formed. We examine the effects on the prices and qualities offered in the m arket of increasing the fraction of informed consumers. In equilibrium, thr ee firm types can exist - high-price/high-quality, low-price/low-quality, a nd high-price/low-quality. The third firm type exploits the uninformed by m imicking the high-quality type's price, but provides low quality. We find t hat increasing the fraction of informed consumers can make the uninformed w orse off by changing the mix of firms to the detriment of the uninformed. ( C) 2002 Elsevier Science B.V. All rights reserved.