Advertising and price have been shown to signal product quality. Most works limit the number of types to high and low quality. I characterize the optimal separating marketing strategy when both quality and marginal cost are uncertain and continuous variables.

A new theory of loss-leader pricing is provided in which firms advertise low (below cost) prices for certain goods to signal that their other unadvertised (substitute) goods are not priced too high. The theory is applied to the pricing of upgrades. The results contrast with most existing...

This paper analyzes the unilateral choices of application compatibility by platforms and the endogenous affiliations of two different groups (content providers and users). We find a novel result that for both platforms to unilaterally choose application compatibility is not an equilibrium unless...

I demonstrate that providing information about product quality is not necessarily the best way to address asymmetric information problems when markets are imperfectly competitive. In a vertical differentiation model I show that a Minimum Quality Standard, which retains asymmetric information,...

This paper studies the relationship between transparency on the consumer side and productivity of firms. We show that more transparent markets are characterized by higher average productivity as firms with low productivity abstain from entering these markets.

We develop a model of product differentiation in which firms strategically compete in product quality and advertising intensity. Products exhibit a combination of vertical and horizontal differentiation. A consumer’s utility has a stochastic relationship with quality, but they are more likely...

This paper investigates the relationship between the diffusion of EU standards and product quality upgrading using highly disaggregated import data to the EU in the food industry. Results show that, on average, the diffusion of EU voluntary standards boosts the rate of quality upgrading....

The existing literature on credence goods and expert services has overlooked the importance of risk aversion. In this paper we extend a standard expert model of credence goods with verifiable service quality by considering risk-averse consumers. Our results show that the presence of risk...

We show how technological leader gains from inviting an entrant into R&D competition to improve over existing patented technology, as the entrant takes complementary R&D effort, and the demand for both current and improved technologies is increasing with aggregate probability for successful...

Bundled discounts by pairs of otherwise independent firms play an increasingly important role as a strategic tool in several industries. Given that prices of firms competing for the same consumers are strategic complements, one would expect their discounts levels also to be strategic...