This paper provides a theoretical framework for investigating the effects of a cost increase on price and quality when firms set both price and quality. Especially, this paper analyzes the monopoly case in detail. The effects of a cost change are found to heavily depend on all first- and...

In this paper we show that in a vertically product differentiation model where foreign and domestic firms compete in quantities, both firms respond by lowering their qualities for a restriction at, or close to, the free trade level. Both firms lower qualities, raise prices and earn higher...

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...

We analyze an oligopolistic competition with differentiated products and qualities. The quality of a product is not known to consumers. Each firm can make an imperfect disclosure of its product quality before engaging in price-signaling competition. There are two regimes for separating...

We provide a dynamic, game-theoretic model to examine a firm’s quality and pricing decisions for a new experience good. Early consumers do not observe product quality prior to purchase but can learn it after purchase and share that product-quality information with later consumers, for example,...

This paper derives conditions under which reputation enables certifiers to resist capture. These conditions alone have strong implications for the industrial organization of certification markets: 1) Honest certification requires high prices that may even exceed the static monopoly price. 2)...

Our study is motivated by the observation that two-sided platforms often exercise control on access to and transactions on at least one side of the market. For example, Apple's rigorous approval process and recent policies that prohibit cross-platform app-building tools is an indication of...

There is widespread evidence that some firms use false advertising to overstate the value of their products. Using a model in which a policymaker is able to punish such false claims, we characterize a natural equilibrium in which false advertising actively influences rational buyers. We analyze...