We investigate the marketing practice of framing a price as a discount from an earlier price. We discuss two reasons why a discounted price---rather than a merely low price---can make a consumer more willing to purchase. First, a high initial price can indicate the product is high quality....

We present a model in which some consumers shop on the basis of price alone, without paying attention to product quality. A firm may "cheat" and offer a worthless product to exploit these inattentive consumers. In the unique symmetric equilibrium, firms follow a mixed strategy involving both...

This chapter reviews recent theoretical work on the design of regulatory policy, focusing on the complications that arise when regulated suppliers have better information about the regulated industry than do regulators. The discussion begins by characterizing the optimal regulation of a monopoly...