Two firms produce a good with a horizontal and a vertical characteristic called quality. The difference in the … unobservable quality levels determines how the firms share the market. We consider two scenarios: in the first one, firms disclose … quality; in the second one, they send costly signals thereof. Under non-comparative advertising a firm advertises its own …

Two firms produce a good with a horizontal and a vertical characteristic called quality. The difference in the … unobservable quality levels determines how the firms share the market. We consider two scenarios: In the first one, firms disclose … quality; in the second one, they send costly signals thereof. Under non-comparative advertising a firm advertises its own …

such communication is that it takes on one of two alternative forms when quality is exogenous: 1) disclosure of quality …Firms communicate product quality attributes to consumers through a variety of channels, such as pricing, advertising … through a credible direct claim; 2) signaling of quality via producer actions that influence buyersÕ beliefs about quality. In …

lower full marginal cost. We characterize the firm�s equilibrium disclosure and pricing behavior, and compare that … behavior and the associated welfare to what would occur under a regime of mandatory disclosure. We derive a range of disclosure … costs that would induce a high-safety firm to choose disclosure over signaling. When the firm�s full marginal cost is …