Product Quality and Imperfect Information
Copyright policy )Product Quality and Imperfect Information
This paper considers markets in which consumers are imperfectly informed about both product prices and quality levels offered by firms. We characterize necessary and sufficient conditions for existence of the various equilibrium configurations of price and quality that can arise in two paradigm cases; when all consumers prefer higher quality and when all consumers prefer lower quality. Our results suggest that firms will exploit imperfect information by charging noncompetitive prices as well as by offering other than ideal quality in the former case, but only by changing noncompetitive prices in the latter case.
- University of California System United States
- California Institute of Technology United States
Sufficient conditions, Market prices, 330, Comparative advantage, consumer behavior, quality uncertainty, imperfectly informed consumers, Consumer prices, Consumer equilibrium, Consumer preferences, Imperfect information, Market prices, Comparative advantage, Demand, Zero profit condition, Consumer information, Sufficient conditions, Demand, Consumer preferences, Imperfect information, Microeconomic theory (price theory and economic markets), Group preferences, product quality, price uncertainty, Zero profit condition, noncompetitive prices, Consumer equilibrium, Consumer prices, Consumer information
Sufficient conditions, Market prices, 330, Comparative advantage, consumer behavior, quality uncertainty, imperfectly informed consumers, Consumer prices, Consumer equilibrium, Consumer preferences, Imperfect information, Market prices, Comparative advantage, Demand, Zero profit condition, Consumer information, Sufficient conditions, Demand, Consumer preferences, Imperfect information, Microeconomic theory (price theory and economic markets), Group preferences, product quality, price uncertainty, Zero profit condition, noncompetitive prices, Consumer equilibrium, Consumer prices, Consumer information
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