TY - JOUR
T1 - Pricing and signaling with frictions
AU - Delacroix, Alain
AU - Shi, Shouyong
N1 - Funding Information:
We thank three anonymous referees for detailed comments that led to significant improvements in the paper. An earlier version of this paper was circulated under the title “Matching, pricing and quality investment”. We have received useful comments from the participants of the Society for Economic Dynamics meeting (Prague, 2007), University of Essex (2010), and the meetings of the Society for the Advancement of Economic Theory (Portugal, 2011; Australia, 2012). We thank Jean-Guillaume Forand and Claudio Michelacci for their comments on a previous version of the paper. Both authors would like to acknowledge financial support from the Social Sciences and Humanities Research Council of Canada . Shi would also like to acknowledge financial support from the Bank of Canada Fellowship and the Canada Research Chair . The opinion expressed here is the authorsʼ own and it does not reflect the view of the Bank of Canada.
PY - 2013/7
Y1 - 2013/7
N2 - We study a market where each seller chooses the quality and price of goods and the number of selling sites. Observing sellers' choices of prices and sites, but not quality, buyers choose which site to visit. A seller's choices of prices can direct buyers' search and signal quality. A unique equilibrium exists and is separating. When the quality differential is large, the equilibrium implements the efficient allocation with public information. Otherwise, the quality of goods and/or the number of sites created is inefficient, due to a conflict between the search-directing and signaling roles of prices.
AB - We study a market where each seller chooses the quality and price of goods and the number of selling sites. Observing sellers' choices of prices and sites, but not quality, buyers choose which site to visit. A seller's choices of prices can direct buyers' search and signal quality. A unique equilibrium exists and is separating. When the quality differential is large, the equilibrium implements the efficient allocation with public information. Otherwise, the quality of goods and/or the number of sites created is inefficient, due to a conflict between the search-directing and signaling roles of prices.
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U2 - 10.1016/j.jet.2013.04.006
DO - 10.1016/j.jet.2013.04.006
M3 - Article
AN - SCOPUS:84878624840
SN - 0022-0531
VL - 148
SP - 1301
EP - 1332
JO - Journal of Economic Theory
JF - Journal of Economic Theory
IS - 4
ER -