Price Competition when Product Quality is Uncertain
AbstractWe consider a market where consumers differ in risk aversion. Two firms sell products of uncertain quality. We characterize the Nash equilibriura in prices and show that, due to consumers' heterogeneity, less reliable products are likely to coexist with more reliable ones in equilibrium. Moreover, choosing to increase the risk component is in some cases an equilibrium strategy.
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Bibliographic InfoPaper provided by Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) in its series Discussion Papers (REL - Recherches Economiques de Louvain) with number 2000043.
Date of creation: 01 Dec 2000
Date of revision:
Other versions of this item:
- GRILO, Isabel & WAUTHY, Xavier, . "Price competition when product quality is uncertain," CORE Discussion Papers RP -1509, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
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- Bouckaert, Jan & Degryse, Hans, 1998.
"Price Competition Between an Expert and a Non-Expert,"
CEPR Discussion Papers
1905, C.E.P.R. Discussion Papers.
- Bouckaert, Jan & Degryse, Hans, 2000. "Price competition between an expert and a non-expert," International Journal of Industrial Organization, Elsevier, vol. 18(6), pages 901-923, August.
- Bouckaert, J.M.C. & Degryse, H.A., 1998. "Price competition between an expert and a non-expert," Discussion Paper 1998-49, Tilburg University, Center for Economic Research.
- David BARDEY, 2004. "A paradoxical risk aversion effect on the consumers’ demand for quality," Discussion Papers (REL - Recherches Economiques de Louvain) 2004015, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
- David Bardey, 2004. "A paradoxical risk aversion effect on the consumers' demand for quality. Localisation et tarification," Recherches économiques de Louvain, De Boeck Université, vol. 70(1), pages 109-115.
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