Journal article
Prices as signals of product quality in a duopoly
INTERNATIONAL JOURNAL OF GAME THEORY, v 52(1)
Mar 2023
Featured in Collection : UN Sustainable Development Goals @ Drexel
Abstract
In a duopoly model of horizontal and vertical differentiation, where consumers are ex-ante unaware of product qualities, we study the firms' incentives to signal quality via prices. Consumers, after they observe prices, can evaluate a firm's product quality before purchase if they incur a search cost. We show that a complete information (undistorted) separating equilibrium and a unique pooling equilibrium (in pure strategies) exist. A lower search cost moves the market equilibrium from pooling to separating and induces a mean-preserving spread in the distribution of the equilibrium prices.
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Details
- Title
- Prices as signals of product quality in a duopoly
- Publication Details
- INTERNATIONAL JOURNAL OF GAME THEORY, v 52(1)
- Publisher
- SPRINGER HEIDELBERG; HEIDELBERG
- Grant note
- We would like to thank an Associate Editor, two Referees, Kaniska Dam, Ricardo Serrano-Padial and seminar participants at 2021 IIOC and 2021 ASSET for very helpful comments. Minghua Chen thanks the support by the Guanghua Talent Project of Southwestern University of Finance and Economics.
- Resource Type
- Journal article
- Language
- English
- Academic Unit
- Drexel University
- Web of Science ID
- WOS:000852922400001
- Scopus ID
- 2-s2.0-85137944519
- Other Identifier
- 991021861280504721
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- Collaboration types
- Domestic collaboration
- International collaboration
- Web of Science research areas
- Economics
- Mathematics, Interdisciplinary Applications
- Social Sciences, Mathematical Methods
- Statistics & Probability