Title

Price and Advertising Signals of Product Quality

Document Type

Discussion Paper

Publication Date

6-1-1984

CFDP Number

709

CFDP Pages

30

Abstract

We present a signalling model, based on ideas of Phillip Nelson, in which both the introductory price and the level of directly “uninformative” advertising or other dissipative marketing expenditures are choice variables and may be used as signals for the initially unobservable quality of a newly introduced experience good. Repeat purchases play a crucial role in our model.

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