We consider an oligopolistic market where firms compete in price and quality and where consumers are heterogeneous in … neither. We show that two types of signalling equilibria are possible. Both are characterised by dispersion and Pareto …-inefficiency of the price/quality offers. But, better price/quality combinations are signalled with lower prices in one type and with …

We present a diagrammatic and step-by-step analysis of price signaling quality. Because quality is a continuum on the … real positive line, out-of-equilibrium beliefs need not be specified, i.e., every positive price is a positive outcome in … equilibrium. We first study the behavior of the monopoly when price conveys information about quality. We then show the effect of …

. The sellers cannot credibly communicate the quality they offer, and consequently price acts as a signal of quality. We … mark case where quality is observable the price of high-quality goods is higher when quality is not observable but must be … inferred from the price …

. Empirical evidence and behavioral research suggest that consumers may perceive a firm's price as unfair when its profit margin …'s monetary payoff (economic surplus) because the firm may reduce its quality to a greater extent than it reduces its price …