Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/54724
Authors: 
Bester, Helmut
Demuth, Juri
Year of Publication: 
2011
Series/Report no.: 
School of Business & Economics Discussion Paper: Economics 2011/20
Abstract: 
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 observed prices make the uninformed consumers more pessimistic about the entrant's quality. When the uninformed consumers' beliefs satisfy the intuitive criterion and the unprejudiced belief refinement, only a two-sided separating equilibrium can exist and prices are identical to the full information outcome.
Subjects: 
quality uncertainty
signalling
oligopoly
JEL: 
D43
D82
L15
Document Type: 
Working Paper

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