Which of the following is a method of signaling used by firms in the presence of asymmetric information?
A) Bundling products together for sale
B) Outsourcing the production of goods and services
C) Offering discounts on the price of goods
D) Offering fixed-wage contracts to employees
E) Building a reputation

Question

Quizplus · Accepted Answer

Building a reputation is a method of signaling used by firms in the presence of asymmetric information. By consistently providing high-quality products and services, firms signal to consumers that they can be trusted, even in the absence of complete information about the product or service. This is particularly important for firms that sell products or services where it may be difficult for consumers to judge quality in advance.

Which of the Following Is a Method of Signaling Used