If a product has two dimensions of quality, one observable and one not, a firm can use observable quality as a signal of unobservable quality. The correlation between consumers' valuation of high quality in each dimension is a key determinant of the feasibility of such signaling. A firm may use...

This paper examines how delivery tariffs and private quality standards are determined in vertical relations that are subject to asymmetric information. We consider an infinitely repeated game where an upstream firm sells a product to a downstream firm. In each period, the firms negotiate a...

This paper analyzes decisions on (in)compatibility and product design of two competing hardware suppliers in the presence of network effects. We show that they either establish compatibility and differentiate their variants strongly or maintain incompatibility and locate their variants at the...

Two firms produce a product with a horizontal and a vertical characteristic that we call quality. The difference in the quality levels determines how the firms share the market. Consumers do not observe quality before purchase. Under non-comparative advertising a firm signals its own quality,...

Who does, and who should initiate costly certification by a third party under asymmetric quality information, the buyer or the seller? Our answer - the seller - follows from a nontrivial analysis revealing a clear intuition. Buyer-induced certification acts as an inspection device,...

Consumers may observe previous consumers’ choices. They may follow their choices if they think these consumers are better informed. In turn, firms may concentrate on influencing the early consumers. This, in turn, changes the nature of early consumers’ choice behavior as a signal for other...

We investigate a two-period Bertrand market in which one seller introduces a new product of uncertain quality. The new product competes with an alternative good of known quality. Ex ante neither sellers nor consumers know the value of the new product. While consumers can learn their valuation by...

The new European framework directive contains a number of policy objectives in the area of net neutrality. In support of these objectives, the universal service directive includes a transparency obligation for ISPs. This paper proposes a multi-stakeholder model for the implementation of this...

This paper studies the relationship between transparency on the consumer side and productivity of firms. We show that more transparent markets are characterized by higher average productivity as firms with low productivity abstain from entering these markets.

This paper considers a market in which only the incumbent's quality is publicly known. The entrant's quality is observed by the incumbent and some fraction of informed consumers. This leads to price signalling rivalry between the duopolists, because the incumbent gains and the entrant loses when...