Firms compete with prices and qualities in markets where consumers have heterogeneous preferences and cost characteristics. Consumers demand two goods, which can be supplied jointly or separately by firms. We consider two strategy regimes for firms: uniform price-quality pairs, and screening price-quality menus. For each regime, we compare the equilibria under integration (each firm supplying both goods) and separation (each firm supplying one good). Integrating and separating markets change quality, efficiency, and welfare. The theory illustrates phenomena such as the carveout of mental health and substance abuse coverage from general health insurance, and creaming for low-cost students in locales with school choices. Copyright 2003 by the RAND Corporation.

Price and quality competition under adverse selection: Market organization and efficiency

Entrepreneurial orientation and start-ups' external financing

Stars vs lemons. Survival analysis of peer-to peer marketplaces: the case of Airbnb

Committed vs opportunistic corporate and social responsibility reporting

Corporate social responsibility is the balance between a firm's economic outcomes and environmental protection. However, investors face increasing difficulties in selecting assets with suitable environmental, social, and governance (ESG) policies because companies may “greenwash” their activities by, for example, make misleading ESG disclosures. Here, we investigate the determinants that lead to companies engaging in ESG greenwashing. By analyzing international large-cap companies across 47 countries and territories, we create a peer-relative greenwashing score to measure the magnitude of ESG greenwashing by companies. First, we measure and evaluate the greenwashing by analyzing ESG disclosures and creating peer-relative performance scores that consider the level of disclosure and the real ESG performance. Second, we show that companies' greenwashing decisions are motivated by financial constraints and thus the financial environment is a determinant of greenwashing behavior. Third, we describe how intermediation can alleviate financial constraints and decrease greenwashing behavior. Moreover, highly leveraged companies may have increased financial pressure and thus may enhance their greenwashing behavior. Our findings are robust according to several different measurements of financial constraint indicators. 

Are firms motivated to greenwash by financial constraints? Evidence from global firms' data

Publisher Summary
This chapter presents a relationship between quality and uncertainty. The existence of goods of many grades poses interesting and important problems for the theory of markets. There are many markets in which buyers use some market statistic to judge the quality of prospective purchases. It is perceived that in these markets, social and private returns differ, and therefore, in some cases, governmental intervention may increase the welfare of all parties. The automobile market is used as a finger exercise to illustrate and develop these thoughts. This market is chosen for its concreteness and ease in understanding rather than for its importance or realism.

George A. Akerlof

Papers

15 – the market for “lemons”: quality uncertainty and the market mechanism*