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Signaling Quality by Delaying Sales

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Abstract

This paper studies the problem of a monopolist privately informed about its product quality, who can sell its product in advance, and faces forward-looking buyers who learn about the quality over time. We show that if the monopolist prefers to sell sooner than later, the unique equilibrium satisfying a standard refinement criterion will be such that high-quality monopolists will postpone sales so as to separate themselves from low-quality ones. An application of the analysis is the allocation of sales among season tickets for sport or musical events. Several testable implications are derived in the comparative static analysis. A somewhat unexpected result is that an increase in the precision of the monopolist's information has a negative effect on economic efficiency.

Suggested Citation

  • Francesco Squintani, 2000. "Signaling Quality by Delaying Sales," RCER Working Papers 476, University of Rochester - Center for Economic Research (RCER).
  • Handle: RePEc:roc:rocher:476
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    File URL: http://rcer.econ.rochester.edu/RCERPAPERS/rcer_476.pdf
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    Cited by:

    1. Hikmet Gunay, 2014. "Waiting for Signaling Quality," Southern Economic Journal, Southern Economic Association, vol. 81(2), pages 364-386, October.

    More about this item

    Keywords

    Asymmetric Information; Signaling; Dynamic Monopoly; Timing of Sales; Stochastic and Dynamic Games.;

    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games

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