If a firm can sell essentially the same product with the same quality under different brand names that have different perceived quality, the firm
A)has a moral hazard problem.
B)benefits from asymmetric information.
C)creates an arbitrage opportunity.
D)is engaging in unfair trading practices.

Question

Quizplus · Accepted Answer

The firm is benefiting from asymmetric information by creating brand names with different perceived quality, which allows them to charge higher prices for the brand with a higher perceived quality. This is a common strategy in many industries, such as the wine industry where the same wine can be sold under different brand names with different perceived quality. This strategy is not necessarily unfair or a moral hazard problem, but it does rely on consumers' perceptions and beliefs about the quality of the different brands.

If a Firm Can Sell Essentially the Same Product with the Same