Price competition when product quality is uncertain
(2000) Recherches économiques de Louvain — Vol. 66, n° 4, p. 415-438 (2000)
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- Abstract
- We consider a market where consumers differ in risk aversion. Two firms sell products of uncertain quality. We characterize the Nash equilibriura in prices and show that, due to consumers' heterogeneity, less reliable products are likely to coexist with more reliable ones in equilibrium. Moreover, choosing to increase the risk component is in some cases an equilibrium strategy.
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Grilo, I., & Wauthy, X. (2000). Price competition when product quality is uncertain. Recherches économiques de Louvain, 66(4), 415-438. https://hdl.handle.net/2078.5/249626 (Original work published 2000)