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:
Find related papers by JEL classification:
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
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- Bouckaert, J & Degryse, Hans, 2000.
"Price competition between an expert and a non-expert,"
Open Access publications from Katholieke Universiteit Leuven
urn:hdl:123456789/101261, Katholieke Universiteit Leuven.
- 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.
- Bouckaert, Jan & Degryse, Hans, 1998. "Price Competition Between an Expert and a Non-Expert," CEPR Discussion Papers 1905, C.E.P.R. Discussion Papers.
- 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.
- 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).
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