Universität Paderborn » SFB 901 » Events


Talk given by Prof. Cheng-Zhong Qin (University Santa Barbara und Shandong University)

Begin: Thu, 18. of Jul 2013 ( 1:00 PM)
Location: Warburger Str. 100, Room C3.212

On July 18, 2013, Prof. Cheng-Zhong Qin will give a talk on "Price and Shortage as Signals of Quality".


This paper analyzes the role of seller-induced shortage as a signal of quality
for a monopoly firm. Unlike dissipative advertising, the cost of inducing shortage
is different for different quality types. It is shown that under certain conditions,
a high-quality monopoly firm (of a new indivisible product) that signals quality
by properly setting price and inducing shortage makes more pro t than using
price and dissipative advertising. The result provides a rationale for why high
quality product monopolies may prefer to initially limit supply with or without
lowering the price.