Price Signalling Differentiated Experience Goods: Are Uniform Movie Prices a Puzzle?

In-Uck Park and Joon Song
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Joon Song: Sungkyunkwan University

Korean Economic Review, 2021, vol. 37, 85-113

Abstract: 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.

Keywords: Experience Good; Movie Pricing; Price Signalling; Uniform Pricing (search for similar items in EconPapers)
JEL-codes: D40 D82 (search for similar items in EconPapers)
Date: 2021
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