This paper focuses on competition between an incumbent and an entrant when only the entrant's quality is unknown to consumers. The incumbent knows the entrant's quality. The entrant's quality is assumed to be exogenously determined by nature, or endogenously chosen by the entrant itself. The...

This paper focuses on competition between an incumbent and an entrant when only the entrant's quality is unknown to (some) consumers. The incumbent may or may not know the entrant's quality. The model reveals a separating equilibrium where the entrant's high price signals its high quality when...