Market power and product quality: review of the literature
In this paper we focus on the relation between product quality and information, which let us distinguishing search and experience goods. We show how literature has studied the way firms signalling the high quality of their products/services: introductory discount pricing, strong advertising expenditures or commitment (for instance, warranties). For search goods we consider contributions dealing with a single-product monopolist (Spence 1975, Rochet and Stole 1999, Lambertini 1998,…) and a multiproduct monopolist (Mussa and Rosen 1978), this first simple model has been used extensively by applied theorists studying regulation, auctions, and labor contracts (Katz 1984, Rochet and Stole 2002,…) For experience goods, we mention for instance the lemons model (Akerlof 1970) and no milking condition (Shapiro 1983)
Product quality, search goods, experience goods, advertising and reputation
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