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Price and Quality in a New Product Monopoly

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Author Info
Judd, Kenneth L
Riordan, Michael H

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Abstract

In a single-extraction model of consumer behavior, higher prices signal higher-quality products for a new product monopoly, even without cost asymmetries across different qualities. Moreover, higher-quality products earn greater expected profits and the monopolist has an incentive to produce even transient improvements in quality. Finally, the monopolist has a positive incentive to conduct market research about quality and produces more information than is socially optimal. Copyright 1994 by The Review of Economic Studies Limited.

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Publisher Info
Article provided by Blackwell Publishing in its journal Review of Economic Studies.

Volume (Year): 61 (1994)
Issue (Month): 4 (October)
Pages: 773-89
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Handle: RePEc:bla:restud:v:61:y:1994:i:4:p:773-89

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  1. Carole Haritchabalet, . "Strategic Experimentation In A Durable Goods Duopoly," UFAE and IAE Working Papers 433.99, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC). [Downloadable!]
  2. Dirk Bergemann & Juuso Valimaki, 2000. "Entry and Vertical Differentiation," Cowles Foundation Discussion Papers 1277, Cowles Foundation, Yale University. [Downloadable!]
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  3. Bipasa Datta & Clive D Fraser, 2006. "The Company You Keep: Qualitative Uncertainty in Providing Club Goods," Discussion Papers 06/21, Department of Economics, University of York. [Downloadable!]
  4. Dirk Bergemann & Juuso Valimaki, 1999. "Entry and Innovation in Vertically Differentiated Markets," Cowles Foundation Discussion Papers 1226, Cowles Foundation, Yale University. [Downloadable!]
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  5. Wassim Daher & Leonard J. Mirman & Marc Santugini, 2008. "Asymmetric Information and the Signaling Role of Prices," Cahiers de recherche 08-09, HEC Montréal, Institut d'économie appliquée, revised Nov 2008. [Downloadable!]
  6. Marco Ottaviani, 2000. "The Value of Public Information in Monopoly," Econometric Society World Congress 2000 Contributed Papers 1479, Econometric Society. [Downloadable!]
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  7. Dirk Bergemann & Juuso Valimaki, 2004. "Monopoly Pricing of Experience Goods," Cowles Foundation Discussion Papers 1463R, Cowles Foundation, Yale University, revised May 2005. [Downloadable!]
  8. Helmut Bester & Klaus Ritzberger, . "Strategic Pricing, Signalling, and Costly Information Acquisition," Papers 008, Departmental Working Papers. [Downloadable!]
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  9. Dirk Bergemann & Juuso Valimaki, 1996. "Market Diffusion with Two-Sided Learning," Cowles Foundation Discussion Papers 1138, Cowles Foundation, Yale University. [Downloadable!]
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  10. Subir Bose & Gerhard Orosel & Marco Ottaviani & Lise Vesterlund, 2008. "Monopoly pricing in the binary herding model," Economic Theory, Springer, vol. 37(2), pages 203-241, November. [Downloadable!] (restricted)
  11. Moraga-González, José Luis & Monteiro, Paulo Klinger, 1999. ""We Sold a Million Units" - The Role of Advertising Past-Sales," Economics Working Papers (Ensaios Economicos da EPGE) 357, Graduate School of Economics, Getulio Vargas Foundation (Brazil). [Downloadable!]
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  12. Alberto Cavaliere, 2004. "Price Competition with Information Disparities in a Vertically Differentiated Duopoly," Working Papers 2004.39, Fondazione Eni Enrico Mattei. [Downloadable!]
  13. Justin P. Johnson & David P. Myatt, 2006. "On the Simple Economics of Advertising, Marketing, and Product Design," American Economic Review, American Economic Association, vol. 96(3), pages 756-784, June. [Downloadable!]
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  14. Luis Cabral, 2007. "Lock in and Switch: Asymmetric Information and New Product Diffusion," Working Papers 07-11, New York University, Leonard N. Stern School of Business, Department of Economics. [Downloadable!]
  15. P. K. Monteiro & J. L. Moraga, 1998. "``We sold a million copies''-The role of advertising past sales," Industrial Organization 9812001, EconWPA. [Downloadable!]
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  16. Gill, David & Sgroi, Daniel, 2008. "The Optimal Choice of Pre-launch Reviewer : How Best to Transmit Information using Tests and Conditional Pricing," The Warwick Economics Research Paper Series (TWERPS) 877, University of Warwick, Department of Economics. [Downloadable!]
  17. David Laibson & Xavier Gabaix, 2004. "Competition and Consumer Confusion," Econometric Society 2004 North American Summer Meetings 663, Econometric Society. [Downloadable!]
  18. Heski Bar-Isaac, 2001. "Self-Confidence and Survival," STICERD - Theoretical Economics Paper Series 428, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE. [Downloadable!]
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