This paper considers price competition in a duopoly with quality uncertainty. The established firm (the `incumbent') offers a quality that is publicly known; the other firm (the `entrant') offers a new good whose quality is not known by some consumers. The incumbent is fully informed about the...

This essay considers the role of reputational information in our marketplace. It explains how well-functioning marketplaces depend on the vibrant flow of accurate reputational information, and how misdirected regulation of reputational information could harm marketplace mechanisms. It then...

We consider a model of price competition in a duopoly with product differentiation and network effects. The value of a good for a consumer is the sum of a common and an idiosyncratic component. The first captures the vertical dimension of quality, the second captures horizontal differentiation....

The market for retail financial products (e.g. investment funds or insurances) is marred by information asymmetries. Clients are not well informed about the quality of these products. They have to rely on the recommendations of advisors. Incentives of advisors and clients may not be aligned,...

If buyers do not observe the quality of a product and production of quality is costly, market allocations can be very inefficient. Certification intermediaries are institutions that provide information about quality to buyers. The amount of information in the market determines the incentives...

There is growing evidence that low-quality customer service prevails in the mobile telecommunications industry. In this paper we provide theoretical support to this empirical observation by using simple game theoretical models where inefficient low-quality service levels are part of an...

Ultimatum games have been extensively used in experimental studies. By studying the consequences that restrictions shared by ultimatum games have in subject's behaviour, this paper argues that some results are falsified by design constraints. This paper also presents a taxonomy of certification,...

Credit-rating agencies have an incentive to maintain a public reputation for credibility among investors but also have an incentive to develop a second, private reputation for leniency among issuers. We show that in markets with few issuers, such as markets for structured assets, these...

In some industries, firms reveal forthcoming improved products through (credible) announcements. In other industries, future product improvements are not announced. In a durable goods market where sellers have private information about their future products, but do not announce those products,...

Unfavorable news are often delivered under the disguise of vagueness. But are people sufficiently naive to be fooled by such positive spin? We use a theoretical model and a laboratory experiment to study the strategic use of vagueness in a voluntary disclosure game. Consider a sender who aims at...