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Differentiated credence goods and price competition

Author

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  • GABSZEWICZ, Jean J.
  • RESENDE, Joana
Abstract
This paper analyses price competition between two firms producing horizontally and vertically differentiated goods. These are assumed to be credence goods, as consumers can hardly ascertain the quality of the commodities. To illustrate the model, we adapt it to represent a newspaper industry with two outlets, when the population of readers have preferences both on the political stance of the newspapers and on the accuracy of the news they dispatch.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • GABSZEWICZ, Jean J. & RESENDE, Joana, 2012. "Differentiated credence goods and price competition," LIDAM Reprints CORE 2461, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvrp:2461
    DOI: 10.1016/j.infoecopol.2012.09.001
    Note: In : Information Economics and Policy, 24(3-4), 277-287, 2012
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    References listed on IDEAS

    as
    1. Gabszewicz, Jean J. & Laussel, Dider & Sonnac, Nathalie, 2001. "Press advertising and the ascent of the 'Pensee Unique'," European Economic Review, Elsevier, vol. 45(4-6), pages 641-651, May.
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    10. Dan Levin & James Peck & Lixin Ye, 2009. "Quality Disclosure And Competition," Journal of Industrial Economics, Wiley Blackwell, vol. 57(1), pages 167-196, March.
    11. Baron, David P., 2006. "Persistent media bias," Journal of Public Economics, Elsevier, vol. 90(1-2), pages 1-36, January.
    12. Andrew F. Daughety & Jennifer F. Reinganum, 2008. "Imperfect competition and quality signalling," RAND Journal of Economics, RAND Corporation, vol. 39(1), pages 163-183, March.
    13. Matthew Gentzkow & Jesse M. Shapiro, 2006. "Media Bias and Reputation," Journal of Political Economy, University of Chicago Press, vol. 114(2), pages 280-316, April.
    14. Matthew Ellman & Fabrizio Germano, "undated". "What Do the Papers Sell?," Working Papers 149, Barcelona School of Economics.
    15. Sendhil Mullainathan & Andrei Shleifer, 2005. "The Market for News," American Economic Review, American Economic Association, vol. 95(4), pages 1031-1053, September.
    16. Armstrong, Mark, 2008. "Interactions between competition and consumer policy," MPRA Paper 7258, University Library of Munich, Germany.
    17. Sendhil Mullainathan & Andrei Shleifer, 2005. "The Market for News," American Economic Review, American Economic Association, vol. 95(4), pages 1031-1053, September.
    18. Stefan Behringer & Lapo Filistrucchi, 2009. "Price Wars in Two-Sided Markets: The case of the UK Quality Newspapers," Working Papers 09-26, NET Institute, revised Dec 2009.
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    Cited by:

    1. Ludwig von Auer & Mark Trede, 2018. "Markets with technological progress: pricing, quality, and novelty," Journal of Economics, Springer, vol. 124(2), pages 121-137, June.
    2. Helmut Bester & Matthias Dahm, 2018. "Credence Goods, Costly Diagnosis and Subjective Evaluation," Economic Journal, Royal Economic Society, vol. 128(611), pages 1367-1394, June.
    3. Sendhil Mullainathan & Andrei Shleifer, 2005. "The Market for News," American Economic Review, American Economic Association, vol. 95(4), pages 1031-1053, September.
    4. Bester, Helmut & Ouyang, Yaofu, 2018. "Optimal procurement of a credence good under limited liability," International Journal of Industrial Organization, Elsevier, vol. 61(C), pages 96-129.
    5. A. Cavaliere & G. Crea, 2022. "Brand premia driven by perceived vertical differentiation in markets with information disparity and optimistic consumers," Journal of Economics, Springer, vol. 135(3), pages 223-253, April.

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    More about this item

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General

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