One striking development associated with the explosion of e-commerce is the increased transparency of sellers' quality. In this paper we analyze how this affects firms' incentives to invest in quality when the outcome of investment is uncertain. We identify two conflicting effects. On the one...

This paper considers price competition in a duopoly with quality uncertainty. The established firm (the `incumbent') offers a quality that is publicly known; the other firm (the `entrant') offers a new good whose quality is not known by some consumers. The incumbent is fully informed about the...