Vertical Product Differentiation and Adverse Selection: An Experimental Note

University of Siena Working Paper No. 305

25 Pages Posted: 5 Jan 2001

See all articles by Luigi Luini

Luigi Luini

University of Siena - Department of Economics

Andrea Mangani

University of Pisa - Department of Political Science

Date Written: October 2000

Abstract

In three identical laboratory markets, sellers possess products whose quality is both exogenously and endogenously determined. Buyers can observe products' quality only in the last session of each experiment. It is also assumed an uneven distribution of income among buyers. We study whether a separating equilibrium arises in such a context, as in traditional models of vertical product differentiation, thus reducing adverse selection outcomes.

Keywords: Asymmetric information, Product differentiation, Durable goods.

JEL Classification: C92, D82, D43

Suggested Citation

Luini, Luigi and Mangani, Andrea, Vertical Product Differentiation and Adverse Selection: An Experimental Note (October 2000). University of Siena Working Paper No. 305, Available at SSRN: https://ssrn.com/abstract=255458 or http://dx.doi.org/10.2139/ssrn.255458

Luigi Luini (Contact Author)

University of Siena - Department of Economics ( email )

Piazza S. Francesco, 7
Siena, I-53100
Italy

Andrea Mangani

University of Pisa - Department of Political Science ( email )

Via Serafini, 3
I-56126 Pisa
Italy

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