Signalling rivalry and quality uncertainty in a duopoly
AbstractThis paper considers a market in which only the incumbent's quality is publicly known. The entrant's quality is observed by the incumbent and some fraction of informed consumers. This leads to price signalling rivalry between the duopolists, because the incumbent gains and the entrant loses when observed prices make the uninformed consumers more pessimistic about the entrant's quality. When the uninformed consumers' beliefs satisfy the intuitive criterion and the unprejudiced belief refinement, only a two-sided separating equilibrium can exist and prices are identical to the full information outcome. --
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Bibliographic InfoPaper provided by Free University Berlin, School of Business & Economics in its series Discussion Papers with number 2011/20.
Date of creation: 2011
Date of revision:
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quality uncertainty; signalling; oligopoly;
Other versions of this item:
- Bester, Helmut & Demuth, Juri, 2013. "Signalling Rivalry and Quality Uncertainty in a Duopoly," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 400, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-02-01 (All new papers)
- NEP-BEC-2012-02-01 (Business Economics)
- NEP-COM-2012-02-01 (Industrial Competition)
- NEP-CTA-2012-02-01 (Contract Theory & Applications)
- NEP-IND-2012-02-01 (Industrial Organization)
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