In a vertically differentiated market with cost asymmetries, the risk dominance criterion selects the equilibrium where the high quality is produced by the efficient firm. We show that a sufficiently high Minimum Quality Standard reverses equilibrium selection. Hence, MQS may be used in order to...

This paper deals with the consequences of setting a label, on both firms?' price strategies in the case of credence goods. We demonstrate that the high quality firm may be better off in the absence of label.Classification JEL : D82, L15

While the economics literature generally agrees that imperfectly competitive firms do not make socially optimal quality choice, there is considerable controversy about the social impact of Minimum Quality Standard (mqs). In this survey, we show that the existence of a second firm is a necessary...

The existing literature on credence goods and expert services has overlooked the importance of risk aversion. In this paper we extend a standard expert model of credence goods with verifiable service quality by considering risk-averse consumers. Our results show that the presence of risk...

Assuming a fixed-proportion downstream production technology, partial forward integration by an upstream monopolist may be observed whether the monopolist is advantaged or disadvantaged cost-wise relative to fringe firms in the downstream market. Integration need not induce cost-predation and...

Assuming a fixed-proportion downstream production technology, partial forward integration by an upstream monopolist may be observed whether the monopolist is advantaged or disadvantaged cost-wise relative to fringe firms in the downstream market. Integration need not induce cost-predation and...