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Price Signals Quality. The Case of One-Sided Asymmetric Information

Author

Listed:
  • Ellingsen, Tore

    (Dept. of Economics, Stockholm School of Economics)

Abstract

The paper considers the pricing decision by a seller who has private information about quality. It is shown that, contrary to widespread belief, high quality products may be sold with positive probability even when buyers have no private information. The separating equilibria have a very simple structure.

Suggested Citation

  • Ellingsen, Tore, 1995. "Price Signals Quality. The Case of One-Sided Asymmetric Information," SSE/EFI Working Paper Series in Economics and Finance 60, Stockholm School of Economics.
    • Handle: RePEc:hhs:hastef:0060
    as

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    More about this item

    Keywords

    Pricing; signalling; product quality; separating equilibrium;
    All these keywords.

    JEL classification:

    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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