Low prices cum selective distribution versus high prices
How best to signal quality
Bibliographic Data
| ID | 19081003 |
|---|---|
| Authors | Nada Ben Elhadj (Institut Supérieur de Gestion de Tunis, University of Tunis, Tunis, Tunisia, corresponding author), Didier Laussel (0000-0002-1590-493X, Groupement de Recherche en Économie Quantitative d’Aix-Marseille, Centre National de la Recherche Scientifique, de l’École des Hautes Études en Sciences Sociales, Aix-Marseille Université (AMSE)) |
| Year | 2017 |
| Volume | 49 |
| Issue | 44 |
| Pages | 4440-4459 |
| Publication date | 2017-02-06 |
| Open Access | No |
| Type | ARTICLE |
| Venue | Applied Economics (JOURNAL) |
| Journal identifiers | ISSN: 0003-6846 • E-ISSN: 1466-4283 |
| Publisher | Taylor & Francis (PUBLISHER • GB) |
| DOI | 10.1080/00036846.2017.1284988 |
| OpenAlex | W2587184913 |
| Language | EN |
| References cited | 9 |
We investigate the best signalling strategy for a monopoly introducing a new product with unobservable quality when second-period sales are linked to first-period ones and the firm may tailor its distribution network to exclude some consumers. When producing a high quality product rather than a low quality one is relatively costly with respect to the increase in quality, optimal signalling is by price alone. But when the cost differential is lower, it will be optimal to set a low first-period price, not to serve all would-be consumers at this price (selective distribution) and raise the price afterwards. Paradoxically, this strategy allows a larger customer base to be reached than in the case of pure price signalling
Business · Econometrics · Economics · Industrial organization · Microeconomics · Monopoly · Price discrimination · Signalling · Unobservable · Consumer Market Behavior and Pricing · Digital Platforms and Economics · Engineering · Game Theory and Applications · Mathematics · Merger and Competition Analysis
| Highly cited | No |
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