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We study an asymmetric information model in which two firms are active on a market where buyers only observe the average quality supplied. Quantities and cost structures are exogenously given and firms compete in quality. Before choosing their qualities, they bargain over a perfectly enforcable...
Persistent link: https://www.econbiz.de/10010281207
The present analysis sheds light on the setting up a regional rating agency in Asia in the wake of recent financial crisis. We investigate the policy facing a financial regulator while evaluating whether or not to admit new entrants into the credit rating market. In an incomplete contracting...
Persistent link: https://www.econbiz.de/10010286141
We examine the interplay of imperfect competition and incomplete information in the context of price competition among firms producing horizontally- and vertically-differentiated substitute products. We find that incomplete information about vertical quality (e.g., consumer satisfaction) that is...
Persistent link: https://www.econbiz.de/10005459269
This paper examines one of the most important marketing strategies by software producers on the Internet. That is whether to offer free samples and if so, whether to list the samples on shareware repositories. I show that firms with higher value products have a greater incentive to offer free...
Persistent link: https://www.econbiz.de/10004970309
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...
Persistent link: https://www.econbiz.de/10010800876
As online information availability for products and services is increasing and as buyers engage in more online search prior to purchase decisions, it is becoming more important for firms to know when to invest to reduce buyer uncertainty. This article argues that today's firms should view...
Persistent link: https://www.econbiz.de/10010905465
The spectacular failure of top-rated structured finance products has brought renewed attention to the conflicts of interest of Credit Rating Agencies (CRAs). We model both the CRA conflict of understating credit risk to attract more business, and the issuer conflict of purchasing only the most...
Persistent link: https://www.econbiz.de/10005012008
We study an asymmetric information model in which two firms are active on a market where buyers only observe the average quality supplied. Quantities and cost structures are exogenously given and firms compete in quality. Before choosing their qualities, they bargain over a perfectly enforcable...
Persistent link: https://www.econbiz.de/10005649261
Two firms produce different qualities at possibly different, constant marginal costs. They compete in quantities on a market where buyers only observe the average quality supplied. The model is a generalization of the standard Cournot duopoly, which corresponds to the special case where the two...
Persistent link: https://www.econbiz.de/10005649387
Firms signal high quality through high prices even if the market structure is highly competitive and price competition is severe. In a symmetric Bertrand oligopoly where products may differ only in their quality, production cost is increasing in quality and the quality of each firm's product is...
Persistent link: https://www.econbiz.de/10005656602