Price Competition when Product Quality is Uncertain

We consider a market where consumers differ in risk aversion. Two firms sell products of uncertain quality. We characterize the Nash equilibriura in prices and show that, due to consumers' heterogeneity, less reliable products are likely to coexist with more reliable ones in equilibrium. Moreover, choosing to increase the risk component is in some cases an equilibrium strategy.

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Year of publication:	2000-12-01
Authors:	GRILO, Isabel ; WAUTHY, Xavier
Institutions:	Institut de Recherche Économique et Sociale (IRES), École des Sciences Économiques de Louvain

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Extent:	application/pdf
Series:	Discussion Papers (REL - Recherches Economiques de Louvain).
Type of publication:	Book / Working Paper
Notes:	The text is part of a series UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Sciences Economiques Number 2000043 2 pages long
Classification:	L13 - Oligopoly and Other Imperfect Markets
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10004985470