ABC Company knows that it produces and sells a very good mousetrap.XYZ Company knows that it produces and sells a lousy mousetrap.According to the signalling theory of advertising,the quality difference likely produces which result

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According to the signalling theory of advertising, a company with a high-quality product (in this case, ABC) has an incentive to spend a large amount of money on advertising to signal its high quality to potential customers. On the other hand, a company with a low-quality product (in this case, XYZ) has little incentive to spend a large amount of money on advertising as it would not change the perception of its product's low quality. Therefore, only ABC has an incentive to spend a large amount of money on advertising its mousetrap, while XYZ does not.

ABC Company Knows That It Produces and Sells a Very