Product announcement and reputation in a cheap talk game

Jay Pil Choi, Jae Hyon Nahm

Research output: Contribution to journalArticle

Abstract

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.

Original languageEnglish
Pages (from-to)59-78
Number of pages20
JournalJournal of Economic Theory and Econometrics
Volume21
Issue number4
Publication statusPublished - 2010 Dec 1

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Keywords

  • Cheap talk
  • Product announcements
  • Reputation

ASJC Scopus subject areas

  • Economics and Econometrics

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