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.
|Number of pages||20|
|Journal||Journal of Economic Theory and Econometrics|
|Publication status||Published - 2010 Dec|
All Science Journal Classification (ASJC) codes
- Economics and Econometrics