Articles

Articles

Price Signalling Differentiated Experience Goods: Are Uniform Movie Prices a Puzzle?
  • Author
    In-Uck Park (University of Bristol) and Joon Song (Sungkyunkwan University)
  • Year
    2021
  • Volume
    Vol.37
  • Number
    No.1
  • In a simple static model of differentiated experience goods supplied by a single seller, we show that both a uniform price equilibrium and a price signalling equilibrium coexist. This is in contrast to the received wisdom that price signalling of quality is nonviable in static settings. We also show that the seller’s profit is always higher in the price signalling equilibrium than in the uniform price equilibrium, but the consumer surplus and social welfare may be higher in either equilibrium depending on the distribution of the consumers’tastes for the differentiated goods. 
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