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Signalling rivalry and quality uncertainty in a duopoly

Helmut Bester and Juri Demuth

No 2011/20, Discussion Papers from Free University Berlin, School of Business & Economics

Abstract: This paper considers a market in which only the incumbent's quality is publicly known. The entrant's quality is observed by the incumbent and some fraction of informed consumers. This leads to price signalling rivalry between the duopolists, because the incumbent gains and the entrant loses when observed prices make the uninformed consumers more pessimistic about the entrant's quality. When the uninformed consumers' beliefs satisfy the intuitive criterion and the unprejudiced belief refinement, only a two-sided separating equilibrium can exist and prices are identical to the full information outcome.

Keywords: quality uncertainty; signalling; oligopoly (search for similar items in EconPapers)
JEL-codes: D43 D82 L15 (search for similar items in EconPapers)
Date: 2011
New Economics Papers: this item is included in nep-bec, nep-com, nep-cta and nep-ind
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Citations: View citations in EconPapers (1)

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https://www.econstor.eu/bitstream/10419/54724/1/680554467.pdf (application/pdf)

Related works:
Journal Article: Signalling Rivalry and Quality Uncertainty in a Duopoly (2015) Downloads
Working Paper: Signalling Rivalry and Quality Uncertainty in a Duopoly (2013) Downloads
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