Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/265020 
Year of Publication: 
2022
Citation: 
[Journal:] The RAND Journal of Economics [ISSN:] 1756-2171 [Volume:] 53 [Issue:] 2 [Publisher:] Wiley [Place:] Hoboken, NJ [Year:] 2022 [Pages:] 356-385
Publisher: 
Wiley, Hoboken, NJ
Abstract: 
We study a search market where firms may design products of inferior quality to promote them to naive consumers who misjudge product characteristics. We derive an equilibrium in which superior and inferior quality co‐exist and show that as search frictions vanish, the share of superior goods goes to zero. The presence of inferior products harms sophisticated consumers, as it forces them to search longer for superior quality. Policy interventions that reduce search frictions such as the standardization of product information may harm welfare. In contrast, educating naive consumers as well as a minimum quality standard can improve welfare.
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by-nc-nd Logo
Document Type: 
Article
Document Version: 
Published Version

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