This paper studies effects of price floors in a simple model of vertical product differentiation. We find that even non-binding price floors can increase quality on the market, if the cost of quality is sufficiently low. Where a binding price floor does not change the equilibrium quality, it...

In this paper we extend the model of vertical product differentiation to also consider information disparities about the extent of quality differences. Equilibrium prices turn out to depend not only on the share of informed consumers but also on uninformed consumers beliefs about quality...