 Competition and the signaling role of pricesFabrizio Adriani and Luca Deidda International Journal of Industrial Organization, 2011, vol. 29, issue 4, 412-425 Abstract: In a market where sellers are heterogeneous with respect to the quality of their good and are more informed than buyers, high quality sellers' chances to trade might depend on their ability to inform buyers about the quality of the goods they offer. We study how the strength of competition among sellers affects the ability of sellers of high quality goods to achieve communication by means of appropriate pricing decisions in the context of a market populated by a large number of strategic price-setting sellers and a large number of buyers. When competition among sellers is weak high quality sellers are able to use prices as a signaling device and this enables them to trade. By contrast, strong competition among sellers inhibits the role of prices as signals of high quality, and high quality sellers are driven out of the market. Keywords: Market; for; lemons; Adverse; selection; Price; dispersion; Price-setting; Signaling; Competition (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:29:y:2011:i:4:p:412-425 Access Statistics for this article International Journal of Industrial Organization is currently edited by P. Bajari, B. Caillaud and N. Gandal More articles in International Journal of Industrial Organization from Elsevier |
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