Price versus Quantity: Market Clearing Mechanisms When Sellers Differ in Quality / Andrew Metrick, Richard Zeckhauser.

Format:

Book

Author/Creator:

Metrick, Andrew.

Contributor:

National Bureau of Economic Research.

Zeckhauser, Richard.

Series:

Working Paper Series (National Bureau of Economic Research) no. w5728.

NBER working paper series no. w5728

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Price versus Quantity

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1996.

Summary:

High-quality producers in a vertically differentiated market can reap superior profits by charging higher prices, selling greater quantities, or both. If qualities are known by consumers and production costs are constant, then having a higher quality secures the producer both higher price and higher quantity; if marginal costs are rising, having a higher quality assures only higher price. If only some consumers can discern quality but others cannot, then high- and low-quality producers may set a common price, but the high-quality producer will sell more. In this context, quality begets quantity. Empirical analyses suggest that in both the mutual fund and automobile industries, high-quality producers sell more units than their low-quality competitors, but at no higher price (or markup) per unit.

Notes:

Print version record

August 1996.