Signals to convey high quality are most effective when they are costless to all firms in the industry.

Question

Quizplus · Accepted Answer

Signals to convey high quality are most effective when they are costly or difficult to replicate, as they create a barrier for low-quality firms to imitate them. This can include investments in branding, certifications, or reputation-building activities. If the signal is costless to all firms, it may not effectively differentiate high-quality firms and may not be as credible to consumers.

Signals to Convey High Quality Are Most Effective When They