A new theory of loss-leader pricing is provided in which firms offer low advertised prices for certain goods to signal that their other unadvertised (substitute) goods are not priced too high. The theory applies to the pricing of upgrades, in which the basic version of the good is advertised,...

First circulated as Price Coherence and Adverse Intermediation: 'http://ssrn.com/abstract= 2373671 ' http://ssrn.com/abstract= 2373671 in December 2013.Suppose an intermediary provides a benefit to buyers when they purchase from sellers using the intermediary's technology. We develop a model to...