Asymmetric information and product differentiation

Emergence of product differentiation from consumer heterogeneity and asymmetric information

We introduce a fully probabilistic framework of consumer product choice based on quality assessment. It allows us to capture many aspects of marketing such as partial information asymmetry, quality differentiation, and product placement in a supermarket.

Product liability and the virtues of asymmetric information

This paper analyzes a ,two-period setup in which firms differ with respect to costs of care and may use care-taking to signal type to consumers, who are able to observe precaution taken only ex post. Applying the refinement of the intuitive criterion to the concept of the perfect Bayesian equilibrium, we establish a unique separating equilibrium for every share of harm borne by firms. For low l...

Product Differentiation and Market Segmentation of Information Goods

Large sunk costs of development, negligible costs of reproduction and distribution, and substantial economies of scale make information goods distinct from physical goods. Consequently, how to take advantage of the specific characteristics of information goods to maximize profit is an important managerial problem. Price discrimination and product differentiation are common ways this problem has...

Copyright and Product Differentiation

Is Online Product Information Availability Driven by Quality or Differentiation?

We present a game theoretic model for the availability of product information in Internet markets, where buyers can search for multiple products in parallel. We use a multiple-circle variation of Salop’s “unit circle” model of product differentiation where vendors are able to differentiate their products both horizontally (taste) and vertically (quality). We explore the conditions under which v...