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The Economic Research Institute, Stockholm School of Economics SSE/EFI Working Paper Series in Economics and Finance

No 60:
Price Signals Quality. The Case of One-Sided Asymmetric Information

Tore Ellingsen ()

Abstract: The paper considers the pricing decision by a seller who has private information about quality. It is shown that, contrary to widespread belief, high quality products may be sold with positive probability even when buyers have no private information. The separating equilibria have a very simple structure.

Keywords: Pricing; signalling; product quality; separating equilibrium; (follow links to similar papers)

JEL-Codes: L15; D82; (follow links to similar papers)

14 pages, July 1995

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This paper is published as:
Ellingsen, Tore, (1997), 'Price Signals Quality. The Case of One-Sided Asymmetric Information', International Journal of Industrial Organization, Vol. 16, pages 43-61



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