Firms invest significantly in advertising with the intent of influencing consumers favorably towards their goods. Along with advertising, word of mouth also plays an important role in shaping consumer opinion about a firm's goods. In many contexts, word of mouth is affected by behaviors such as...

We examine pricing in markets where products may be of heterogeneous quality and buyers have heterogeneous preferences. The sellers cannot credibly communicate the quality they offer, and consequently price acts as a signal of quality. We determine the equilibria of the model both when the...

This paper studies the general deterrence effect associated with regulatory enforcement actions, using data on the quality violations and regulatory enforcement records of all 141,290 active drinking water systems in the U.S. between 1980 and 2017. We find that general deterrence among drinking...

In 2013, Stiftung Warentest tested hazelnut chocolate for their leading magazine, called Test. Stiftung Warentest is one of the most important consumer organizations in Germany. Ritter Sport is a high-quality producer of chocolate in Germany. Their hazelnut chocolate did not pass the test. It...

In markets for experience or credence goods adverse selection can drive out higher quality products and services. This negative implication of asymmetric information about product quality for trading and welfare, poses the question of how such markets originate. We consider a market in which...

This paper explores the relationship between corporate governance and asymmetric information. We find that proxies for governance mechanisms that encourage the monitoring of managers and rewards managers for moderating shirking and perquisite consumption are inversely related to proxies for...

I analyze a market where there is a homogeneous good, which quality is chosen, and therefore known, by a single producer. Consumers do not know the quality of the good but they use their acquaintances in order to obtain information about it. Information transmission exhibits decay and consumers...

Both consumers and a monopolist producer are uncertain about a good's quality. I derive conditions under which the value of public information about quality will be positive or negative to consumers and the firm. I find that the firm always prefers more information, but consumers may not. I...

Prior studies have argued that quality uncertainty for experience goods may be in part resolved by firm-specific reputational assets. This paper demonstrates that unobserved quality may also be signaled by a reputational asset common to many firms – country of origin. Analyzing stock market...