A new version of this paper, co-authored with Santanu Roy, has become available on February 14, 2022. The paper shows that asymmetric information about product quality can create incentives for a privately informed manufacturer to sell to uninformed consumers through a retailer and to maintain secrecy of upstream pricing. Delegating retail price setting to an intermediary generates pooling equilibria that avoid signaling distortions associated with direct selling. We develop a new equilibrium refinement that is motivated by considerations similar to the Intuitive Criterion for standard signaling games and show that the pooling equilibrium satisfies this refinement.
For the paper, please click here.