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Entry Deterrence and Signaling in Markets for Search Goods

Author

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  • de Bijl, P.W.J.

    (Tilburg University, Center For Economic Research)

Abstract

This paper studies entry in markets for search goods. Signaling through prices is studied when an entrant s quality is (i) private information; and (ii) common information of entrant and incumbent. When consumers visit a store, they observe quality and can switch before purchasing. When switching costs are low, an entrant can signal high quality by setting a sufficiently high price; consumers who find out that quality is low switch to the incumbent. Entry may be facilitated when switching costs are sufficiently low, or when the incumbent knows the entrant s type.

Suggested Citation

  • de Bijl, P.W.J., 1995. "Entry Deterrence and Signaling in Markets for Search Goods," Discussion Paper 1995-16, Tilburg University, Center for Economic Research.
  • Handle: RePEc:tiu:tiucen:ed8fbe6b-b950-4ca0-ad73-4c9f2ec92844
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    References listed on IDEAS

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    Cited by:

    1. Müller, Wieland & Spiegel, Yossi & Yehezkel, Yaron, 2009. "Oligopoly limit-pricing in the lab," Games and Economic Behavior, Elsevier, vol. 66(1), pages 373-393, May.
    2. Fulan Wu, 2016. "Entry And Quality Signalling When Only Some Consumers Are Informed Of The Entrant'S Quality," Bulletin of Economic Research, Wiley Blackwell, vol. 68(3), pages 297-310, April.
    3. Levent Çelik, 2008. "Strategic Informative Advertising in a Horizontally Differentiated Duopoly," CERGE-EI Working Papers wp359, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    4. Hoffmann, Ruben, 2002. "Ownership Structure And Endogenous Quality Choice," 2002 Annual meeting, July 28-31, Long Beach, CA 19869, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).

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