effect is large enough, then the Schmalensee effect degenerates and, thus, low prices signal high quality. This result is … quality can be signaled by high prices is based on the assumption that higher quality necessarily incurs higher production … cost. In this paper, the authors argue that firms producing high-quality products have a stronger incentive to lower the …

effect is large enough, then the Schmalensee effect degenerates and, thus, low prices signal high quality. This result is … quality can be signaled by high prices is based on the assumption that higher quality necessarily incurs higher production … cost. In this paper, the author argues that firms producing high-quality products have a stronger incentive to lower the …

We consider an oligopolistic market where firms compete in price and quality and where consumers are heterogeneous in … knowledge: some consumers know both the prices and quality of the products offered, some know only the prices and some know … neither. We show that two types of signalling equilibria are possible. Both are characterised by dispersion and Pareto …

Firms signal high quality through high prices even if the market structure is highly competitive and price competition … is severe. In a symmetric Bertrand oligopoly where products may differ only in their quality, production cost is … increasing in quality and the quality of each firm’s product is private information (not known to consumers or to other firms …