price equilibrium and a price signalling equilibrium coexist. This is in contrast to the received wisdom that price … signalling of quality is nonviable in static settings. We also show that the seller's profit is always higher in the price … signalling equilibrium than in the uniform price equilibrium, but the consumer surplus and social welfare may be higher in either …

bunching occurs, the bunching interval is necessarily smaller. Additionally, under certain conditions the monopoly solution may … even achieve the ?rst best (i.e., production ef?ciency). We also demonstrate that the optimal monopoly so- lutions can be …