Browsing by Author "Guadalupi, Carla"

Now showing 1 - 3 of 3
  • Thumbnail Image
    Item
    Prices as signals of quality : experimentation and information acquisition
    (2015) Guadalupi, Carla; Figueroa González, Nicolás Andrés; Pontificia Universidad Católica de Chile. Instituto de Economía
    This paper examines the optimal pricing strategy for newly introduced experience goods in a two-period monopoly market with experimentation and private information about quality. Consumers learn about quality through price signaling and experimentation, and communicate their ndings to other buyers via word of mouth. We show the existence of a unique separating equilibrium that satis es the intuitive criterion. In this equilibrium, a high-quality seller signals high quality through a low introductory price that rises in the next period (after experimentation has occurred), while a low-quality one charges a high introductory price, which declines over time because the revealed information is likely to be bad. This result helps explain recent empirical evidence and case studies on the introductory pricing strategies of rms entering foreign product markets.
  • No Thumbnail Available
    Item
    Signaling through tests
    (2023) Figueroa, Nicolas; Guadalupi, Carla
    A firm (sender), privately informed about product quality, chooses a public test. Tests vary in informativeness and return a binary result. The market (receiver) forms interim beliefs based on test informativeness and posteriors based on test results. We show that standard single-crossing does not hold everywhere. A more informative test is less costly to the high type, who fails it less often, while better interim beliefs may benefit either the high or the low type depending on the prior. When a firm's expected quality is low, an increase in interim beliefs makes the market more sensitive to test results. Then the high type has more incentives to choose a more informative test and separation occurs. When a firm's expected quality is high, a further increase in interim beliefs makes the market less sensitive to test results. In this case, the unique equilibrium is pooling with both types choosing a test with intermediate level of informativeness.
  • No Thumbnail Available
    Item
    Testing the sender: When signaling is not enough
    (2021) Figueroa, Nicolas; Guadalupi, Carla
    A worker, privately informed about his fit with a firm, chooses an action to signal this information. The firm might perform a test and decides whether to hire the worker. We define firm effectiveness as the difference between the optimal probabilities of hiring a good-fit and a bad-fit worker, and show that it has an inverted U-shape with respect to beliefs. When the worker's expected fit is low, firm effectiveness is increasing in beliefs, and information is revealed through both signaling and information acquisition. Since the high type is more likely to pass a more exacting test, he will exert costly effort to improve firm's beliefs. When, on the other hand, the worker's expected fit is high, firm effectiveness is decreasing in beliefs and any signaling effort made by the high type would be mimicked by the low type, who benefits more from relaxed standards, so that information is generated exclusively by the firm through tests. (c) 2021 Elsevier Inc. All rights reserved.