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Abstract
Firms keep introducing new products in markets. In making a buy-or-wait decision, consumers rely on information provided by firms. In a cheap-talk game model (i.e., Crawford and Sobel (1982), we identify a simple informative equilibrium, in which firms make a discrete announcement, either low or high quality, even though product quality space is continuous. We characterize the equilibrium properties and evaluate its welfare effects. |
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Keywords Product announcements, Cheap talk, Reputation |
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JEL classification codes L1, D8 |
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Journal of the Korean Econometric Society |
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