We reexamine the role of prices and advertising expenditures as signals of quality. Consumers are either ``fastidious'' or ``indifferent.'' Fastidious individuals value high quality more and low quality less than do indifferent individuals. Then a sensible and robust separating equilibrium...

To account for the possibility that firms are unsure about the ease of innovation, we formulate a differential game of R&D competition with an unknown hazard rate. We show, as time passes with success, firms become more pessimistic about eventual innovation, reducing their R&D investment and...