We examine a model of suppliers selling to two segments of consumers, who have different preferences for quality (or some product characteristic). We show that if the firm is unable to price discriminate between the segments, then there is less investment in quality. We find that both consumer...

We examine a model of a monopolist selling to two segments of consumers with different preferences for quality. We show that if the firm is unable to price discriminate between the segments, then there is less investment in quality. We find that both consumer segments, and society overall, may...