A new theory of loss-leader pricing is provided in which firms advertise low (below cost) prices for certain goods to signal that their other unadvertised (substitute) goods are not priced too high. The theory is applied to the pricing of upgrades. The results contrast with most existing...

For a number of applications of signaling, it is sometimes more reasonable to assume that senders rather than nature choose their unobserved features (e.g. their private choices of quality). In other situations, it makes no sense for nature to determine senders' unobserved features (e.g. their...

We show that the Nash demand game has the fictitious play property. We also show that almost every fictitious play process and its associated belief path converge to a pure-strategy Nash equilibrium in the Nash demand game.

We present a fictitious-play model of bargaining, where two bargainers play the Nash demand game repeatedly. The bargainers make a deliberate decision on their demands in the initial period and then follow a fictitious play process subsequently. If the bargainers are patient, the set of epsilon...