Price and Advertising Signals of Product Quality

Paul Milgrom and John Roberts

No 709, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: We present a signalling model, based on ideas of Phillip Nelson, in which both the introductory price and the level of directly "uninformative" advertising or other dissipative marketing expenditures are choice variables and may be used as signals for the initially unobservable quality of a newly introduced experience good. Repeat purchases play a crucial role in our model.

Pages: 28 pages
Date: 1984-06
Note: CFP 676.
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Citations: View citations in EconPapers (14)

Published in Journal of Political Economy (1986), 94(4): 796-821

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