Price signalling differentiated experience goods: are uniform movie prices a puzzle?

In-Uck Park, Joon Song*

*Corresponding author for this work

Research output: Contribution to journalArticle (Academic Journal)peer-review

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Abstract

In a simple static model of differentiated experience goods supplied by a single seller, we show that both a uniform price equilibrium and a price signalling equilibrium coexist. This is in contrast to the received wisdom that price signalling of quality is nonviable in static settings. We also show that the seller’s profit is always higher in the price signalling equilibrium than in the uniform price equilibrium, but the consumer surplus and social welfare may be higher in either equilibrium depending on the distribution of the consumers’tastes for the differentiated goods.
Original languageEnglish
Pages (from-to)85-113
Number of pages29
JournalKorean Economic Review
Volume37
Issue number1
Publication statusPublished - 1 Jan 2021

Structured keywords

  • ECON Microeconomic Theory

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