Competitive pricing despite search costs if lower price signals quality

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Tác giả: Sander Heinsalu

Ngôn ngữ: eng

Ký hiệu phân loại: 641.555 Timesaving cooking

Thông tin xuất bản: 2018

Mô tả vật lý:

Bộ sưu tập: Metadata

ID: 161975

I show that firms price almost competitively and consumers can infer product quality from prices in markets where firms differ in quality and production cost, and learning prices is costly. Bankruptcy risk or regulation links higher quality to lower cost. If high-quality firms have lower cost, then they can signal quality by cutting prices. Then the low-quality firms must cut prices to retain customers. This price-cutting race to the bottom ends in a separating equilibrium in which the low-quality firms charge their competitive price and the high-quality firms charge slightly less.
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