It is shown that if there is adverse selection on seller’s ability in experience goods market, credible communication can be sustained by reputation motives in spite of the inherent conflict of interests between sellers and buyers. In the absence of “commitment” types, reputation motives...

In a simple static model of differentiated experience goods supplied by a single seller, we show that both a uniform price equilibrium and a price signalling equilibrium coexist. This is in contrast to the received wisdom that price signalling of quality is nonviable in static settings. We also...