We study a game in which two competing sellers supplying experience goods of different quality can induce a perspective buyer into a bad purchase through (costly) deceptive advertising. We characterize the equilibrium set of the game and argue that an important class of these outcomes features...

In this paper, I study markets where consumers are heterogeneous with respect to both their concerns for the quality of goods and the image associated with them. Consumers with a taste for quality lend a positive image to the product of their choice and thereby increase the product's value to...

Consumption patterns can be indicative of how a consumer wants to be perceived by others. In this paper, I study markets where consumers are heterogeneous with respect to both their concerns for the quality of goods and the image associated with buying them. Consumers with a taste for quality...

The authors reexamine the Schmalensee effect from a dynamic perspective. Schmalsensee’s argument suggesting that high quality can be signaled by high prices is based on the assumption that higher quality necessarily incurs higher production cost. In this paper, the authors argue that firms...

The author reexamines the Schmalensee effect from a dynamic perspective. Schmalsensee’s argument suggesting that high quality can be signaled by high prices is based on the assumption that higher quality necessarily incurs higher production cost. In this paper, the author argues that firms...

In this paper we examine the behavior of a firm that produces a product with a privately-observed safety attribute; that is, consumers cannot observe directly the product's safety. The firm may, at a cost, disclose its safety prior to sale; alternatively, if a firm does not disclose its safety...

We compare certification to a minimum quality standard (MQS) policy in a duopolistic industry where firms incur quality-dependent fixed costs and only a fraction of consumers observes the quality of the offered goods. Compared to the unregulated outcome, both profits and social welfare would...

We analyze firms’ incentives to disclose deficiencies of their goods when consumers lack information. We distinguish two types of information: First, only some consumers are aware of the existence of deficiencies, which reduce the quality of the goods. Second, only some consumers have the...

There is widespread evidence that some firms use false advertising to overstate the value of their products. Using a model in which a policymaker is able to punish such false claims, we characterize a natural equilibrium in which false advertising actively influences rational buyers. We analyze...