The Simple Analytics of Price Signaling Quality
We present a diagrammatic and step-by-step analysis of price signaling quality. Because quality is a continuum on the real positive line, out-of-equilibrium beliefs need not be specified, i.e., every positive price is a positive outcome in equilibrium. We first study the behavior of the monopoly when price conveys information about quality. We then show the effect of information flows on welfare, i.e., profit and consumer surplus.
|Date of creation:||Mar 2011|
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References listed on IDEAS
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- Janssen, Maarten C.W. & Roy, Santanu, 2010.
"Signaling quality through prices in an oligopoly,"
Games and Economic Behavior,
Elsevier, vol. 68(1), pages 192-207, January.
- Andrew F. Daughety & Jennifer F. Reinganum, 2005.
"Imperfect Competition and Quality Signaling,"
Vanderbilt University Department of Economics Working Papers
0520, Vanderbilt University Department of Economics.
- Daughety, Andrew F & Reinganum, Jennifer F, 1995.
"Product Safety: Liability, R&D, and Signaling,"
American Economic Review,
American Economic Association, vol. 85(5), pages 1187-1206, December.
- Andrew F. Daughety & Jennifer F. Reinganum, 1994. "Product Safety: Liability, R&D and Signaling," Game Theory and Information 9403007, EconWPA, revised 30 Mar 1994.
- Daughety, Andrew & Reinganum, Jennifer, 1992. "Product Safety: Liability, R & D and Signaling," Working Papers 94-17, University of Iowa, Department of Economics, revised 1994.
- Daughety, Andrew F. & Reinganum, Jennifer F., 2007.
"Competition and confidentiality: Signaling quality in a duopoly when there is universal private information,"
Games and Economic Behavior,
Elsevier, vol. 58(1), pages 94-120, January.
- Andrew F. Daughety & Jennifer F. Reinganum, 2004. "Competition and Confidentiality: Signaling Quality in a Duopoly when there is Universal Private Information," Vanderbilt University Department of Economics Working Papers 0417, Vanderbilt University Department of Economics.
- Leonard J. Mirman & Marc Santugini, 2008. "The Informational Role of Prices," Cahiers de recherche 08-09, HEC Montréal, Institut d'économie appliquée, revised Apr 2014.
- Andrew F. Daughety & Jennifer F. Reinganum, 2008.
"Communicating quality: a unified model of disclosure and signalling,"
RAND Journal of Economics,
RAND Corporation, vol. 39(4), pages 973-989.
- Andrew F. Daughety & Jennifer F. Reinganum, 2007. "Communicating Quality: A Unified Model of Disclosure and Signaling," Vanderbilt University Department of Economics Working Papers 0703, Vanderbilt University Department of Economics.
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