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...

We consider the dynamic network formation problem under the requirement that the whole network be connected and remain connected after q nodes are destroyed. We propose the concept of dynamic Cq-stability and characterize dynamic Cq-stable networks for any qÏ0. Comparison with the outcome in...