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Imperfect competition and quality signalling Author info | Abstract | Publisher info | Download info | Related research | Statistics Andrew F. Daughety
Jennifer F. Reinganum
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We examine the interplay of imperfect competition and incomplete information in the context of price competition among firms producing horizontally and vertically differentiated substitute products. Incomplete information about vertical quality (consumer satisfaction) signalled via price softens price competition. Low-quality firms always prefer the incomplete information game to the full-information analog. Moreover, for high-value markets with a sufficiently high proportion of high-quality firms, these firms also prefer incomplete information to full information. We find that an increase in the loss to consumers associated with the low-quality product may perversely benefit low-quality firms; we consider applications to tort reform and professional licensing. Copyright (c)2008, RAND.
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Article provided by RAND Corporation in its journal The RAND Journal of Economics .
Volume (Year): 39 (2008)
Issue (Month): 1 ()
Pages: 163-183
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Handle: RePEc:bla:randje:v:39:y:2008:i:1:p:163-183Contact details of provider: Web page: http://www.blackwellpublishing.com/journal.asp?ref=0741-6261
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References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile , click on "citations" and make appropriate adjustments.: Andrew F. Daughety & Jennifer F. Reinganum, 1994.
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